UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
| Filed by the Registrant [X] | |
| Filed by a Party other than the Registrant [ ] | |
| Check the appropriate box: | |
| [ ] | Preliminary Proxy Statement |
| [ ] | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| [X] | Definitive Proxy Statement |
| [ ] | Definitive Additional Materials |
| [ ] | Soliciting Material under §240.14a-12 |
| Repro Med Systems, Inc. |
| (Name of Registrant as Specified In Its Charter) |
| (Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
| Payment of Filing Fee (Check the appropriate box): | ||
| [X] | No fee required. | |
| [ ] | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |
| (1) | Title of each class of securities to which transaction applies: | |
| (2) | Aggregate number of securities to which transaction applies: | |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |
| (4) | Proposed maximum aggregate value of transaction: | |
| (5) | Total fee paid: | |
| [ ] | Fee paid previously with preliminary materials. | |
| [ ] | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |
| (1) | Amount Previously Paid: | |
| (2) | Form, Schedule or Registration Statement No.: | |
| (3) | Filing Party: | |
| (4) | Date Filed: | |
Repro Med Systems, Inc.
d/b/a KORU Medical Systems
24 Carpenter Road
Chester, New York 10918
(845) 469-2042
Notice of Annual Meeting of Shareholders
To Be Held May 6, 2022
The 2022 Annual Meeting of Shareholders (the “Annual Meeting”) of Repro Med Systems, Inc. d/b/a KORU Medical Systems (the “Company”) will be held on May 6, 2022 at 8:00 a.m. Eastern Time at the Sheraton Mahwah Hotel, 1 International Boulevard, Route 17 North, Mahwah, NJ 07495.
The Annual Meeting is to vote on the following matters:
| 1. | Election of directors | |
| 2. | Approval of the Company’s Non-Employee Director Compensation Plan | |
| 3. | Approval of an amendment to the Company’s Restated Certificate of Incorporation, as amended, to change the Company’s name to “KORU Medical Systems, Inc.” | |
| 4. | Approval of the Agreement and Plan of Merger between the Company and a to-be-formed wholly-owned Delaware subsidiary (“KORU Delaware”), pursuant to which the Company will merge with and into KORU Delaware for the sole purpose of changing the Company’s name and state of incorporation from New York to Delaware, including to approve the Certificate of Incorporation and Bylaws of KORU Delaware | |
| 5. | Approval, on an advisory basis, of the compensation of the Company’s executive officers | |
| 6. | Ratification of the appointment of independent registered public accountants for the 2022 fiscal year | |
| 7. | Transaction of any other business that may properly come before the meeting |
All shareholders are invited to attend the Annual Meeting. Only those shareholders of record at the close of business on March 14, 2022 are entitled to notice of and to vote at the Annual Meeting and any postponements or adjournments thereof. A complete list of shareholders entitled to vote at the Annual Meeting will be available for inspection by any shareholder at the Annual Meeting and during normal business hours at the Company’s corporate headquarters during the 10-day period immediately prior to the date of the Annual Meeting. Officers of the Company will be present at the Annual Meeting and available to respond to questions from shareholders.
Important Notice Regarding the Availability of Proxy Materials for the Meeting to be Held on May 6, 2022: This Proxy Statement, along with our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 is available at https://www.cstproxy.com/KORUMEDICAL/2022.
We have mailed to our shareholders of record and beneficial owners a Notice of Internet Availability of Proxy Materials containing instructions on how to access the attached proxy statement and our 2021 Annual Report on Form 10-K via the Internet and how to vote online or by mobile device. The Notice of Internet Availability of Proxy Materials and the proxy statement also contain instructions on how you can receive a paper or electronic copy of the proxy materials. If you elect to receive a paper or electronic copy of our proxy materials, our 2021 Annual Report on Form 10-K will be sent to you along with the proxy statement.
The Notice of Internet Availability of Proxy Materials is being mailed, and the attached proxy statement is being made available, to our shareholders beginning on or about March 25, 2022.
YOUR VOTE IS IMPORTANT. To vote your shares, you can (i) use the Internet or mobile device, as described in the Notice of Internet Availability of Proxy Materials and on your proxy card; or (ii) complete, sign and date your proxy card and return your proxy card by mail. Whether or not you plan to attend the Annual Meeting, we urge you to vote and submit your proxy in advance of the meeting by one of the methods described in the proxy materials for the Annual Meeting. Shareholders who attend the Annual Meeting may revoke their proxies and vote by internet or mobile device up until the polls close during the Annual Meeting.
By order of the Board of Directors,
/s/ Karen Fisher
Chief Financial Officer, Treasurer and Corporate Secretary
Repro Med Systems, Inc.
24 Carpenter Road
Chester, New York 10918
(845) 469-2042
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Repro Med Systems, Inc. d/b/a KORU Medical Systems (the “Company”, “KORU Medical” or “KORU” and, as the context requires, “we”, “us” or “our”) to be used at the Company’s 2022 Annual Meeting of Shareholders to be held on May 6, 2022 at the time and place and for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders, and at any postponements or adjournments thereof. All proxies will be voted in accordance with the shareholders’ instructions, and if no choice is specified, the proxies will be voted in favor of the matters specified in the accompanying Notice of Annual Meeting of Shareholders and each of the director nominees specified herein. Any proxy may be revoked by a shareholder before its exercise by delivery of written revocation or a subsequently dated proxy to our Corporate Secretary by the close of business on May 5, 2022 or by voting again by internet or mobile device prior to or at the Annual Meeting before the polls close.
NOTICE OF ELECTRONIC AVAILABILITY OF PROXY MATERIALS
On or about March 25, 2022, we mailed to our shareholders of record and beneficial owners a Notice of Internet Availability of Proxy Statement (“Notice”) containing instructions on how to access this Proxy Statement and our 2021 Annual Report on Form 10-K via the Internet and how to vote online or by mobile device. This Proxy Statement, along with our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 is available at https://www.cstproxy.com/KORUMEDICAL/2022. As a result, you will not receive a paper copy of the proxy materials unless you request one. All shareholders are able to access the proxy materials on the website referred to in the Notice and in this Proxy Statement and to request to receive a set of the proxy materials by mail or electronically, in either case, free of charge. If you would like to receive a paper or electronic copy of our proxy materials, you should follow the instructions for requesting such materials in this Proxy Statement.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
What is the record date?
The record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting is the close of business on March 14, 2022. The record date is established by the Board of Directors as required by New York law. On the record date, 44,671,160 shares of the Company’s common stock, par value $0.01 per share (“common shares” or “common stock”) were issued and outstanding.
Who is entitled to vote?
All record holders of common shares as of the close of business on March 14, 2022 are entitled to vote. As of the record date, there were 44,671,160 shares of common stock issued and outstanding.
What are the voting rights of shareholders?
Each holder of common shares is entitled to one vote per common share on all matters to be acted upon at the Annual Meeting. Neither the Company’s Restated Certificate of Incorporation, as amended (our “Certificate of Incorporation”), nor our Amended and Restated By-laws allow for cumulative voting rights.
What constitutes a quorum for the Annual Meeting?
A majority of the outstanding shares of common stock entitled to vote, represented at the meeting in person or by proxy, constitutes a quorum. Broker non-votes, votes withheld and abstentions will be counted for purposes of determining whether a quorum is present.
- 1 -
How do I vote my common shares?
KORU offers registered shareholders two ways to vote:
| • | By Internet or mobile device, following the instructions on the Notice or the proxy card, prior to or at the Annual Meeting before the polls close; or | |
| • | By mail (if you received your proxy materials by mail), using the enclosed proxy card and return envelope. |
How do I attend the Annual Meeting? What do I need to bring?
In order to be admitted to the Annual Meeting, you must bring documentation showing that you owned common shares as of March 14, 2022, the record date. Acceptable documentation includes (i) your Notice of Internet Availability of Proxy Materials, (ii) the admission ticket attached to your proxy card (if you received your proxy materials by mail), or any other proof of ownership (such as a brokerage or bank statement) reflecting your KORU holdings as of March 14, 2022. All attendees must also bring valid photo identification. Shareholders who do not bring this documentation will not be admitted to the Annual Meeting.
Can I vote my common shares during the Annual Meeting?
Yes. If you are a shareholder of record, you may vote your common shares during the Annual Meeting by accessing https://www.cstproxy.com/KORUMEDICAL/2022 until the polls close or by completing a ballot at the meeting. However, if your common shares are held in “street name,” you may vote your common shares in person only if you obtain a nominee-issued proxy from your broker or nominee giving you the right to vote the common shares. Even if you currently plan to attend the Annual Meeting, we recommend that you also submit your proxy as described above so that your vote will be counted if you later decide not to attend the meeting.
What is the difference between a shareholder of record and a “street name” holder?
If your common shares are registered directly in your name with Continental Stock Transfer & Trust Company, the Company’s transfer agent, you are considered the shareholder of record with respect to those common shares. The Notice and proxy card have been sent directly to you by the Company.
If your common shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of these common shares, and your common shares are held in “street name.” The Notice and proxy card have been forwarded to you by your broker, bank or nominee who is considered, with respect to those common shares, the shareholder of record.
How do I vote shares that are held by my broker?
If you have shares held by a broker or other nominee, you may instruct your broker or other nominee to vote your shares by following instructions that your broker or nominee provides to you. Most brokers offer voting by mail and the Internet.
What if I do not specify how I want my common shares voted?
If you return a signed proxy card and do not specify on your proxy card (or when giving your proxy over the Internet or mobile device) how you want to vote your common shares, your common shares will be voted FOR each of the directors nominated in Proposal 1, and FOR each of the proposals set forth in Proposals 2, 3, 4, 5 and 6.
Broker non-votes occur when nominees, such as banks and brokers holding shares on behalf of beneficial owners, do not receive voting instructions from the beneficial holders. If that happens, the banks and brokers who are registered with the New York Stock Exchange (NYSE) may vote those shares only on matters deemed “routine” by the NYSE, such as the ratification of the appointment of the Company’s independent registered public accounting firm. On “non-routine” matters nominees cannot vote unless they receive voting instructions from beneficial owners, resulting in so called “broker non-votes.” The items being considered at the Annual Meeting, except for the ratification of the appointment of the Company’s independent registered public accounting firm, are considered “non-routine” matters. Therefore, it is important that you provide voting instructions to your broker as to how you want your shares voted on the proposals being submitted at the Annual Meeting.
How do I find out the voting results?
Preliminary results are typically announced at the Annual Meeting. Final voting results will be reported on a Form 8-K filed with the Securities and Exchange Commission following the Annual Meeting.
- 2 -
What are my choices when voting?
Shareholders may vote “for,” “against” or abstain from voting with respect to each of Proposals 2, 3, 4, 5 and 6 described in the Notice and this Proxy Statement. Shareholders may vote “for” or “against” all or some of the nominees, or vote “withhold” with respect to one or more of the nominees with respect to Proposal 1 (Election of Directors).
What are the recommendations of the Board of Directors on how I should vote my common shares?
The Board of Directors recommends that you vote your common shares FOR each of the director nominees in Proposal 1 and FOR each of Proposals 2, 3, 4, 5 and 6.
Can I change my vote?
Yes. You may revoke your proxy at any time by any of the following means:
| • | Attending the Annual Meeting and voting by one of the methods described in the proxy materials for the Annual Meeting. Your attendance at the Annual Meeting will not by itself revoke a proxy. You must vote your common shares at the meeting, prior to the polls closing, to revoke your proxy. If your common shares are held in “street name,” you will need a nominee-issued proxy from your broker to vote your common shares at the meeting. | |
| • | Completing and submitting a new valid proxy bearing a later date by Internet, mobile device or mail before 11:59 pm on May 5, 2022. | |
| • | Giving written notice of revocation to the Company addressed to Corporate Secretary, at the Company’s address above, which notice must be received before the close of business on May 5, 2022. |
What percentage of the vote is required to elect the nominees to the Board of Directors?
To be elected as a director (Proposal 1), each director nominee must receive a plurality of the votes cast at the Annual Meeting by the shareholders entitled to vote in the election of directors. Should any director nominee become unable or unwilling to accept nomination or election, the proxy holders may vote the proxies for the election, in his or her stead, of any other person the Board of Directors may nominate or designate. Each director nominee has expressed their intention to serve the entire term for which election is sought. Broker non-votes and votes “withheld” will have no impact on the outcome of Proposal 1.
What percentage of the vote is required to approve the Non-Employee Director Compensation Plan?
The affirmative vote of a majority of the votes cast for or against at the Annual Meeting by the shareholders entitled to vote thereon is required to approve, by advisory vote, the Company’s Non-Employee Director Compensation Plan (Proposal 2). Broker non-votes and abstentions will have no effect on the outcome of Proposal 2.
What percentage of the vote is required to approve the amendment to the Company’s Certificate of Incorporation to change the name of the Company to “KORU Medical Systems, Inc.” (the “Name Change”)?
The affirmative vote of a majority of all outstanding shares entitled to vote thereon is required to approve the Name Change (Proposal 3). Broker non-votes and abstentions will have the same effect as votes “against” Proposal 3.
What percentage of the vote is required to approve the Agreement and Plan of Merger between the Company and a to-be-formed wholly-owned Delaware subsidiary (“KORU Delaware”), pursuant to which the Company will merge with and into KORU Delaware for the sole purpose of changing the Company’s name and state of incorporation from New York to Delaware, including to approve the Certificate of Incorporation and Bylaws of KORU Delaware (the “Reincorporation”)?
The affirmative vote of the holders of at least two-thirds of the Company’s outstanding common shares entitled to vote thereon is required to approve the Reincorporation (Proposal 4). Broker non-votes and abstentions will have the same effect as votes “against” Proposal 4.
What percentage of the vote is required to approve the advisory vote regarding executive compensation?
The affirmative vote of a majority of the votes cast for or against at the Annual Meeting by the shareholders entitled to vote thereon is required to approve, by advisory vote, the Company’s executive compensation described in this Proxy Statement (Proposal 5). This is a non-binding advisory vote. Broker non-votes and abstentions will have no effect on the outcome of Proposal 5.
- 3 -
What percentage of the vote is required to ratify the appointment of independent registered accountants?
The affirmative vote of a majority of the votes cast in favor of or against at the Annual Meeting by the shareholders entitled to vote thereon is required to ratify the appointment of the independent registered accountants (Proposal 6). This is a non-binding advisory vote. Broker non-votes and abstentions will have no effect on the outcome of Proposal 6.
Is this Proxy Statement the only way that proxies are being solicited?
No. In addition to the solicitation of proxies by use of the mail, officers and employees of the Company may solicit the return of proxies by mail, telephone, facsimile or e-mail or through personal contact. These officers and employees will not receive additional compensation but will be reimbursed for out-of-pocket expenses. Brokerage houses and other custodians, nominees and fiduciaries, in connection with common shares registered in their names, will be requested to forward solicitation materials to the beneficial owners of common shares.
Are there any other matters to be acted upon at the Annual Meeting?
Management does not intend to present any business for a vote at the Annual Meeting other than the matters set forth in the Notice and has no information that others will do so. If other matters requiring a vote of the shareholders properly come before the Annual Meeting, it is the intention of the persons named in the accompanying form of proxy to vote the shares represented by the proxies held by them in accordance with applicable law and their discretion on such matters.
What does it mean to vote by proxy?
It means that you give someone else the right to vote your shares in accordance with your instructions. In this way, you ensure that your vote will be counted even if you are unable to attend the Annual Meeting. If you give your proxy but do not include specific instructions on how to vote, the individuals named as proxies will vote your shares “FOR” each of the director nominees and FOR Proposals 2, 3, 4, 5 and 6.
What is “householding” and how does it affect me?
KORU has adopted “householding,” a procedure under which shareholders of record who have the same address and last name will receive a single Notice of Internet Availability of Proxy Materials or set of proxy materials, unless one or more of these shareholders notifies the Company that they wish to continue receiving individual copies. Shareholders who participate in householding will continue to receive separate proxy cards. This procedure can result in significant savings to the Company by reducing printing and postage costs.
If you participate in householding and wish to receive a separate Notice of Internet Availability of Proxy Materials or set of proxy materials, or if you wish to receive separate copies of future notices, special reports and proxy materials, please contact Continental Transfer & Trust Company at 1 State Street 30th floor, New York, NY 10004, phone (212) 509-4000. The transfer agent will deliver the requested documents to you promptly upon your request.
Any shareholders of record who share the same address and currently receive multiple copies of proxy materials who wish to receive only one copy of these materials per household in the future may contact Continental Transfer & Trust Company at the address or telephone number listed above. If you hold your shares through a broker, bank or other nominee, however, please contact your broker, bank, or other nominee to request information about householding.
Are there rights of dissent or appraisal for the proposals submitted at the Annual Meeting?
None of the matters to be acted on at the Annual Meeting give rise to any statutory right of a shareholder to dissent and obtain the appraisal of or payment for such shareholder’s shares.
- 4 -
ELECTION OF DIRECTORS
The Board of Directors is currently comprised of nine directors which will be decreased to seven directors immediately following the Annual Meeting. The Board of Directors has nominated seven directors for election by the shareholders at the Annual Meeting (the “Director Nominees”) to serve until the 2023 Annual Meeting of Shareholders, or until their respective successors have been duly elected and qualified. Shareholders will be unable to vote their proxies for more than seven persons.
Director Nominees
The following table sets forth the name, age and positions of each Director Nominee:
| Name | Age | Position / Held Since | ||
| R. John Fletcher | 76 | Chairman of the Board (since September 2019) Director (since May 2019) | ||
| James M. Beck | 74 | Director (since December 2018) | ||
| Robert A. Cascella | 67 | Director Nominee | ||
| Donna French | 57 | Director (since May 2021) | ||
| Joseph M. Manko, Jr. | 56 | Director (since May 2016) | ||
| Shahriar (Shar) Matin | 47 | Director (since May 2021) | ||
| Linda Tharby | 53 | Director Nominee Chief Executive Officer (since April 2021) |
All directors hold office until the next annual meeting of shareholders or until their successors are elected.
Mr. Fletcher brings more than 35 years of healthcare and medical device experience to KORU. He founded Fletcher Spaght Inc., a strategy consulting and venture capital firm, in 1983 and as its managing partner emeritus, remains active with the company, advising both the consulting practice and venture capital activities, with analytical insights and creative solutions derived from his years of experience with clients, portfolio companies and the investment community. John works across Fletcher Spaght’s practice groups, with a focus on healthcare. Prior to founding Fletcher Spaght, Mr. Fletcher was a senior manager at The Boston Consulting Group, advising a broad range of companies in healthcare and high technology industries. Mr. Fletcher joined the board of directors of publicly-traded medical device company Spectranetics Corporation in 2002 and served as Chairman of the Board from 2010-2017 during its turnaround and subsequent sale to Philips N. V. For this work, he was selected as 2018 Director of the Year by the National Association of Corporate Directors. Mr. Fletcher currently also serves as the Chairman of ClearPoint Neuro (formerly MRI Interventions), Vyant Bio and Metabolon, Inc. He is Chairman Emeritus of the Corporate Collaboration Council at the Thayer School of Engineering/Tuck School of Business at Dartmouth College and serves on the Board of Advisors of Beth Israel Deaconess Medical Center and the Whitehead Institute at MIT. Mr. Fletcher received his MBA from Southern Illinois University, his BBA in Marketing from George Washington University and his MS in International Finance from Carnegie Mellon University. He is an instructor for courses in international business and was a PhD Candidate at the Wharton School of the University of Pennsylvania. Mr. Fletcher was a Captain and jet pilot instructor in the US Air Force.
Mr. Beck has more than 40 years of healthcare services and distribution general management experience. Mr. Beck served as the Company’s interim CEO from January 2021 through April 2021. Mr. Beck most recently served as Executive Chairman of Medical Specialties Distributors (“MSD”), a leading service solution provider serving the home infusion, home medical equipment, and oncology markets, from 2016 to 2018 and a Director from 2007 to 2018. He previously served as President and Chief Executive Officer of MSD from 2007 to 2016. Prior to joining MSD, Jim held various executive and management positions with leading healthcare companies such as American Hospital Supply/Baxter Healthcare, AMSCO International, Spectrum Healthcare, and SHPS Health Management Solutions. Mr. Beck is currently a member of the board of directors of Hilco Vision, a privately owned eye health business located in Plainville, MA.
- 5 -
Mr. Cascella has more than 30 years of impressive track records in supporting value creation in the healthcare industry, with a strong focus on innovation and integrated solutions. Mr. Cascella joined Royal Philips in 2015 and served as CEO of its Precision Diagnostics business and an executive committee member until 2021. Prior to this advisory role he held the position of Executive Vice President and Strategic Business Development Leader at Royal Philips and was also a member of the company’s Executive Committee. Before joining Royal Philips, Mr. Cascella spent 11 years at Hologic, a global leader in women’s health, as its president and later CEO. Mr. Cascella currently serves on the boards of Celestica Inc., Mirion Technologies, Inc, Neuronetics, Inc. and Metabolon, Inc. Mr. Cascella holds a B.A. in accounting from Fairfield University.
Dr. French, Ph.D., is a pharmaceutical industry veteran with over 25 years of experience in pharmaceutical sciences and drug-device combination products. Dr. French, has been Vice President of Dosage Form Design and Development at AstraZeneca since June 2017. Prior to joining AstraZeneca, Dr. French was Senior Director of Device Development at Genentech from January 2009 to May 2017. She was Executive Director of Drug Delivery Engineering at Amgen, Inc. before joining Genentech. For her entire career, Dr. French has been developing and commercializing drug products, drug delivery systems and devices. She has led the development and commercialization of numerous products with delivery devices worldwide, including auto-injectors, pen injectors, needle stick prevention devices, prefilled syringes, needle-free injectors, subcutaneous infusion devices, intraocular delivery devices, inhalation drug delivery systems, and patient aids and tools for drug preparation and administration. Dr. French earned her B.S. in Pharmacy from Albany College of Pharmacy, and her Ph.D. in Pharmaceutical Sciences from the University of Nebraska.
Mr. Manko has been the Senior Principal in Horton Capital Management LLC, the investment manager for the Horton Capital Partners Fund, LP (“Horton Fund”) since 2013. The Horton Fund is a significant shareholder in the Company. Mr. Manko has over 20 years of investment experience in the asset management, investment banking, private equity and corporate securities markets. From 2005 to 2010, Mr. Manko was a Partner and Chief Executive Officer of Switzerland-based BZ Fund Management Limited, where he was responsible for corporate finance, private equity investments, three public equity funds and the firm’s Special Situations and Event-Driven strategies. Prior to that Mr. Manko was a Managing Director with Deutsche Bank in London. He began his investment banking career at Merrill Lynch as a Vice President in Hong Kong and prior to that, Mr. Manko was a corporate finance attorney at Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Manko has served on the board of several companies in the bio-pharmaceutical industry and has advised numerous companies in the pharmaceutical, biotech and medtech industries and currently serves as a director of Safeguard Scientifics, Inc. Mr. Manko has also served on the board of directors of Wireless Telecom Group, Inc., and Creative Realities, Inc. Mr. Manko earned both his B.A. and Juris Doctor from the University of Pennsylvania.
Mr. Matin is the CEO and director of Cordis Corporation, a customer focused provider of interventional cardiovascular technologies, since August 2021. Mr. Matin has over 20 years of medical device technology experience in Fortune 500 and mid/small cap companies where he led commercial and technical teams in the United States, Europe and Asia. In his previous role as Chief Operating Officer of ViewRay, Inc. from July 2018 through March 2021, he built the organization’s team and capabilities to disrupt the $6 billion radiation oncology market. As Chief Operating Officer of Spectranetics, from January 2014 to November 2017, he was instrumental in growing the enterprise value from $250 million to over $2 billion prior to its acquisition by Royal Philips. From 2007 to 2014, Mr. Matin held commercial and operation leadership roles of increasing responsibilities at Spectranetics. Before joining Spectranetics, Mr. Matin also served in several commercial and engineering leadership roles at Boston Scientific and Guidant Corporation. He holds an MBA from Harvard Business School and received a B.E. from the University of California, Berkeley.
Ms. Tharby has served as the Company’s Chief Executive Officer since April 2021. Ms. Tharby has over 25 years of executive leadership experience building and leading strong performing global organizations that develop and commercialize products and service innovations, while delivering solutions to patients in the home setting. Prior to joining the Company, Ms. Tharby spent the last 24 years working in various roles of increased responsibility at Becton Dickinson (“BD”). Ms. Tharby was a member of the Executive Leadership team of BD that transformed the company from an $8 billion medical supplies company to an $18 billion global medical technology company. Ms. Tharby’s most recent role at BD was Chief Customer Experience Officer from July 2018 through December 2020. In her prior role, as BD’s Chief Human Resources Officer, from October 2016 through July 2018, she led the company through its $24 billion acquisition and integration of C.R. Bard in 2017. She also held numerous global business leadership roles at BD, including Executive Vice President and President of Life Sciences, Group President of Pre-Analytical Systems and Biosciences, Worldwide President of Diabetes Care, and Vice President/General Manager of Pharmaceutical Systems. Ms. Tharby has an Honors Bachelor of Business Administration from Wilfrid Laurier University in Waterloo, Ontario Canada.
Ms. Tharby has entered into an agreement with the Company whereby she will be deemed to have automatically resigned from the Board simultaneously with the termination of her employment as the Company’s Chief Executive Officer.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE DIRECTOR NOMINEES IN PROPOSAL 1.
UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED BY THE COMPANY WILL BE
VOTED “FOR” THE ELECTION OF THE NOMINEES LISTED ABOVE.
- 6 -
APPROVAL OF NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
On February 9, 2022, our Board approved the Repro Med Systems, Inc. d/b/a KORU Medical Systems Non-Employee Director Compensation Plan (the “Director Compensation Plan”), which sets forth the cash and equity compensation that is to be paid to our non-employee directors in a specific, formulaic manner. The Director Compensation Plan memorializes the Company’s current non-employee director compensation policy and does not increase fees payable to non-employee directors pursuant to that policy. Since the Company’s 2021 Omnibus Equity Incentive Plan was approved by the shareholders at the 2021 annual meeting of shareholders, shares of common stock issued as non-employee director compensation have been issued pursuant to that 2021 Omnibus Equity Incentive Plan. If the Director Compensation Plan is approved by the shareholders, the Company currently intends to issue shares of its common stock as director fees pursuant to the Director Compensation Plan, although the Company may also issue shares of its common stock as director fees pursuant to the Company’s 2021 Omnibus Equity Incentive Plan.
The material features of the Director Compensation Plan are summarized below. This summary is qualified in its entirety by reference to the full text of the Director Compensation Plan, which is set forth in Appendix A to this Proxy Statement.
Pursuant to the Director Compensation Plan, each person who is a non-employee director shall be entitled to receive without further action by the Board an annual fee equal to $110,000 per calendar year (the “Base Fee”), of which $50,000 will be paid in cash and $60,000 will be paid in shares of common stock, as provided below. The Chairman of the Board shall be entitled to receive an annual fee in addition to the Base Fee of $40,000 to be paid in shares of common stock, as provided below. The Chairman of the Audit Committee shall be entitled to receive an annual fee in addition to the Base Fee of $15,000 to be paid in cash. The Chairman of the Compensation Committee shall be entitled to receive an annual fee in addition to the Base Fee of $11,500 to be paid in cash. The Chairman of the Nominating and Corporate Governance Committee shall be entitled to receive an annual fee in addition to the Base Fee of $7,500 to be paid in cash. These fees are paid in equal quarterly installments in arrears on the last business day of each calendar quarter.
Shares of common stock issued in lieu of annual fees will be fully vested and unrestricted shares of common stock. The number of shares of common stock issuable as annual fees is equal to the dollar amount of annual fees payable in common stock divided by the fair market value of the common stock on each respective payment date. For purposes of the Director Compensation Plan, “fair market value” means (i) if the common stock principally trades on a national securities exchange other than the Nasdaq Capital Market, the closing sale price of a share of common stock, and (ii) if the common stock principally trades on the Nasdaq Capital Market (as it does currently) or an over-the counter marketplace, the arithmetic mean of the high and low prices of a share of common stock (and if the mean results in a fractional cent, rounded up to the nearest cent), in each case as reported on the last trading day before the payment date. The arithmetic mean of the high and low prices of a share of common stock as reported on the Nasdaq Capital Market on March 1, 2022 was $3.30. There is no maximum number of shares of common stock that may be issued under the Director Compensation Plan; however, non-employee directors may not receive annual fees paid in shares of common stock that have a fair market value (determined as of the date of grant) in excess of $750,000 in a single calendar year.
The Director Compensation Plan is intended only for our non-employee directors on the basis of each director’s membership to the Board. There are currently nine non-employee director nominees that would be eligible to participate in the Director Compensation Plan. The Director Compensation Plan is intended to promote the interests of the Company by providing an inducement in the form of fees to certain qualified persons who are not employees of the Company to serve as members of the Company’s Board. The Director Compensation Plan also seeks to align the interests of these non-employee directors with the interests of the Company’s shareholders by providing for a portion of these fees to be paid in shares of common stock of the Company.
We are asking our shareholders to approve our Director Compensation Plan as described in this Proxy Statement. If the shareholders do not approve the Director Compensation Plan, then non-employee director compensation will be governed by the existing non-employee director compensation policy, which is materially identical to the Director Compensation Plan except fees paid in common stock will be paid pursuant to the Company’s shareholder-approved 2021 Omnibus Equity Incentive Plan.
- 7 -
Equity Compensation Plan Information
as of December 31, 2021
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| (a) | (b) | (c) | |
| Equity compensation plans approved by security holders | 3,672,500 | 3.42 | 1,023,342 |
| Equity compensation plans not approved by security holders (1) | 1,000,000 | 3.31 | 1,000,000 |
| Total | 4,672,500 | 2,023,342 |
__________
(1) Represents unvested shares of restricted stock issued to our Chief Executive Officer as inducement to her employment. Does not include an indeterminate number of shares issuable to our Chief Executive Officer pursuant to her employment agreement, representing 30% of her annual bonus.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED BY THE COMPANY WILL BE VOTED “FOR” THIS PROPOSAL.
CHANGE OF THE COMPANY’S NAME TO “KORU MEDICAL SYSTEMS, INC.”
Repro Med Systems, Inc. has been the Company’s legal name since its formation in 1980. On March 2, 2022, the Board adopted a resolution to amend the Company’s Restated Certificate of Incorporation, as amended, to change the legal name of the Company to “KORU Medical Systems, Inc.” (the “Name Change Amendment”), subject to shareholder approval.
Since October 24, 2019, the Company has operated under its registered “doing business as” name, “KORU Medical Systems” and our common stock has traded on the Nasdaq Capital Market under the symbol “KRMD”. The Company’s decision to rebrand was inspired by the koru, a widely recognized symbol of a spiral-shaped, unfurling fern that represents new life and new beginnings, consistent with the Company’s focus on providing patients’ new beginnings with our at-home infusion systems.” The Company believes that its existing legal name should be changed to reflect this rebranding to avoid confusion with customers, investors and others, as well as to promote the brand itself.
A copy of the Name Change Amendment is attached hereto as Appendix E and incorporated by reference herein.
If the Name Change Amendment is approved, we intend to file it with the Secretary of State of the State of New York as soon as practicable following such approval. At any time prior to the filing of the Name Change Amendment with the Secretary of State of the State of New York, notwithstanding shareholder approval thereof and without further action by the shareholders, the Board, in its sole discretion, may abandon or delay the filing of the Name Change Amendment.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSAL 3 TO CHANGE THE COMPANY’S NAME TO “KORU MEDICAL SYSTEMS, INC.” UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED BY THE COMPANY WILL BE VOTED “FOR” THIS PROPOSAL.
REINCORPORATION OF THE COMPANY FROM NEW YORK TO DELAWARE
On March 4, 2022, our Board of Directors has unanimously approved changing the Company’s state of incorporation from New York to Delaware, pursuant to which the Company would merge with and into a to-be-formed wholly-owned subsidiary of the Company incorporated in Delaware. Further, our Board of Directors has determined that the terms of the Merger Agreement by which the Reincorporation will be effected, and the terms of the merged entity’s Certificate of Incorporation (the “New Charter”) and Bylaws (the “New Bylaws”), are fair to, and in the best interests of, the Company and our shareholders. For the reasons discussed below, the Board of Directors recommends that the shareholders vote FOR the Reincorporation.
- 8 -
Reasons for the Reincorporation
Historically, Delaware has followed a policy of encouraging incorporation in that state and, in furtherance of that policy, its legislature has adopted comprehensive, modern and flexible corporate laws which are updated and revised regularly in response to the legal and business needs of corporations organized under its laws. As a result, the Delaware General Corporation Law (the “Delaware Law” or “DGCL”) is widely regarded as the most extensive and well−defined body of corporate law in the United States, and many corporations initially choose Delaware for their domicile or subsequently reincorporate there in a manner similar to that proposed by the Company.
The Delaware legislature has shown an ongoing sensitivity to corporate law issues and needs, as noted above. In addition, over the past century a well−established body of judicial decisions construing the DGCL has developed, providing directors and officers with a greater measure of certainty and predictability in managing corporate affairs than exists in other jurisdictions. Many investors also prefer the certainty and predictability of the corporate affairs of a Delaware corporation as compared to corporations formed in other states. While it may be possible under the New York Business Corporation Law (“New York law” or “NYBCL”) to obtain some of the same advantages offered to the Company under the DGCL, the New York legislature and courts do not always offer the same levels of certainty and predictability to a corporation as their Delaware counterparts. Accordingly, the Board of Directors believes that a change in incorporation from New York to Delaware would be in the best interests of the Company and its shareholders.
Despite the belief of the Board of Directors that the Reincorporation is in the best interests of the Company and its shareholders, it should be noted that the interests of the Board of Directors, management and affiliated shareholders in voting on the Reincorporation may not be the same as those of unaffiliated shareholders. Delaware Law does not afford minority shareholders all of the same substantive rights and protections available under New York law. For a comparison of shareholders’ rights and the powers of management under Delaware and New York law see “Comparative Summary of Rights and Obligations Under New York and Delaware Law” below.
Required Vote
Under New York law, the affirmative vote of the holders of two-thirds of the Company’s outstanding shares entitled to vote on this Proposal 4 is required for approval of the Reincorporation.
Principal Features of the Reincorporation
The following discussion is qualified in its entirety by reference to the Merger Agreement and by the applicable provisions of New York Law and Delaware Law.
The Reincorporation will be effected by the merger of the Company with and into KORU Delaware pursuant to the Merger Agreement, a copy of which is attached to this Proxy Statement as Appendix B. KORU Delaware will be a wholly-owned subsidiary of the Company incorporated by us under the DGCL for the sole purpose of effecting the Reincorporation. KORU Delaware will have no operations and no assets or liabilities prior to the merger. Prior to the merger, Delaware will have one share of common stock issued and outstanding, held by the Company, and will have only minimal capital. The terms of the merger provide that the single share of KORU Delaware common stock held by the Company will be cancelled following the Reincorporation, and the outstanding shares of the Company’s common stock will automatically convert on a one-to-one basis into shares of the common stock of KORU Delaware. Following the Reincorporation, the Company will no longer be a New York corporation governed by the Company’s current Certificate of Incorporation and its current By-laws and will instead be a Delaware corporation governed by the New Charter and the New Bylaws, each in the form attached to this Proxy Statement under Appendices C and D, respectively.
The Reincorporation will become effective (the “Effective Time”) upon the later of (i) the acceptance for filing of the Certificate of Merger (the “New York Merger Certificate”) by the Secretary of State of New York, (ii) the acceptance for filing of the Certificate of Merger (the “Delaware Merger Certificate”) by the Secretary of State of Delaware or (iii) such other time as agreed upon by the two corporations and set forth in the New York Merger Certificate and the Delaware Merger Certificate. As a result of the Reincorporation, we will cease our corporate existence in the State of New York. However, the Reincorporation will not affect any change in our business, management or operations or the location of our principal executive offices.
- 9 -
At the Effective Time:
| • | Each outstanding share of our common stock will be converted into one share of KORU Delaware common stock with the same par value (the “Delaware Common Stock”); | |
| • | Each outstanding share of Delaware Common Stock held by the Company will be retired and canceled and will become authorized and unissued Delaware Common Stock; | |
| • | Each outstanding option to purchase shares of the Company’s common stock will be deemed to be an option to purchase the same number of shares of Delaware Common Stock, with no change in the exercise price or other terms or provisions of the option; and | |
| • | Each other equity award relating to the Company’s common stock will be deemed to be an equity award for the same number of shares of Delaware Common Stock, with no change in the terms or provisions of the option or equity award. |
In addition, at the Effective Time, all the assets and liabilities of the Company will become the assets and liabilities of KORU Delaware, our directors and officers will become the directors and officers of KORU Delaware, and all of our employee benefit and incentive plans will become KORU Delaware plans. Shareholders should note that approval of the Reincorporation will also constitute approval of these plans continuing as plans of KORU Delaware. Our employment contracts and other employee benefit arrangements also will be continued by KORU Delaware upon the terms and subject to the conditions in effect at the time of the Reincorporation. We believe that the Reincorporation will not affect any of our material contracts with any third parties, and that our rights and obligations under such material contractual arrangements will continue as rights and obligations of KORU Delaware, [except that we will be required to reapply for our line of credit and other arrangements with Key Bank, NA in order to have KORU Delaware expressly assume all of the obligations of the Company in connection therewith.
If approved by the shareholders, the Board intends that the Reincorporation be consummated in the first quarter of 2023, coincident to the Company’s applications in connection with the new Medical Device Regulations in the European Union. Nonetheless, the Merger Agreement by which the Reincorporation will be effected allows the Board of Directors to accelerate, abandon or postpone the Reincorporation or to amend the Merger Agreement (except that the principal terms may not be amended without shareholder approval) either before or after the shareholders’ approval has been obtained and before the Effective Time, if circumstances arise causing the Board of Directors to deem any of such actions advisable.
Other than receipt of shareholder approval and the filing of the New York Merger Certificate with the New York Secretary of State and the Delaware Merger Certificate with the Delaware Secretary of State, to our knowledge, there are no federal or state regulatory requirements or approvals that must be obtained in order for us to consummate the Reincorporation. Although the Reincorporation will require a technical relisting of our common stock on the Nasdaq Capital Market following the Reincorporation, our common stock will continue to be traded on the Nasdaq Capital Market under the same symbol, “KRMD.”
Exchange of Stock Certificates
If the Reincorporation is approved, it will not be necessary for shareholders to exchange their existing Company stock certificates for KORU Delaware stock certificates. However, at any time on or after the Effective Time, each holder of a certificate representing pre−Reincorporation common stock of the Company shall be entitled, upon request and upon surrender of such certificate to KORU Delaware, to receive in exchange for such certificate, one or more new stock certificates evidencing ownership of such number of shares of Delaware Common Stock into which such pre−Reincorporation common stock of the Company was converted as a result of the Reincorporation.
If any certificate representing shares of Delaware Common Stock is to be issued in a name other than that in which the certificate surrendered is registered, the person surrendering the certificate must endorse the certificate for transfer and pay to KORU Delaware’s transfer agent any transfer or other taxes required by reason of the issuance of a certificate in a name other than that of the registered holder of the certificate surrendered, or shall establish to the satisfaction of the transfer agent that such tax has been paid or is not payable.
In the event any stock certificate representing pre−Reincorporation common stock of the Company has been lost, stolen or destroyed, upon the affidavit of the person claiming the certificate was lost, stolen or destroyed, KORU Delaware will cause to be issued a new certificate representing such Delaware Common Stock into which the shares of the lost, stolen or destroyed certificate were converted in conjunction with the Reincorporation. When authorizing such an issuance, the Board of Directors may, in its discretion, require the owner of the lost, stolen or destroyed certificate to deliver a bond to KORU Delaware in such form and amount as the Board may direct as indemnity against any claim that may be made against KORU Delaware with respect to the certificate alleged to have been lost, stolen or destroyed.
- 10 -
Following the Reincorporation, KORU Delaware’s transfer agent will continue to be Continental Stock Transfer & Trust Company.
No Change in Transferability of Shares
Shareholders whose shares of the Company’s common stock were freely tradable before consummation of the Reincorporation will own shares of Delaware Common Stock that are freely tradable after consummation of the Reincorporation.
Shareholders holding pre−Reincorporation shares of the Company’s common stock with transfer restrictions will hold post−Reincorporation shares of Delaware Common Stock that have the same restrictions. For purposes of Rule 144 under the Securities Act of 1933, as amended, shareholders who hold Delaware Common Stock will be deemed to have acquired those shares on the date they originally acquired their corresponding shares of the Company’s common stock.
Dissenters’ Rights of Appraisal
Shareholders of the Company do not have appraisal rights under New York law as a result of the proposed Reincorporation. Pursuant to Section 910(A) of the NYBCL, appraisal rights are available with respect to any plan of merger or consolidation to which the corporation is a party; except that the right to receive payment of the fair value of shares shall not be available: (i) to a shareholder of the parent corporation in a merger authorized by section 905 (merger of parent and subsidiary corporations), or paragraph (c) of section 907 (merger or consolidation of domestic and foreign corporations).
Certain Federal Income Tax Consequences of the Reincorporation
The following is a brief summary of certain federal income tax consequences to holders of the Company’s common stock who receive Delaware Common Stock as a result of the Reincorporation. The summary sets forth such consequences to the Company’s shareholders who hold their shares as a capital asset (generally, an asset held for investment).
This summary is for general information only and does not purport to be a complete discussion or analysis of all potential tax consequences that may apply to a shareholder. Shareholders are urged to consult their tax advisors to determine the particular tax consequences of the Reincorporation, including the applicability and effect of federal, state, local or foreign tax laws. The summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Regulations promulgated thereunder, and rulings and decisions in effect as of the date of this Proxy Statement, all of which are subject to change, possibly with retroactive effect, and to differing interpretations.
The Company has neither requested nor received a tax opinion from legal counsel with respect to the federal income tax consequences of the Reincorporation. No rulings have been or will be requested from the Internal Revenue Service as to the federal income tax consequences of the Reincorporation.
The Reincorporation provided for in the Merger Agreement is intended to be treated as a “tax-free” reorganization as described in Section 368(a)(1)(F) of the Code. Assuming that the Reincorporation qualifies as a “tax-free” reorganization, no gain or loss will be recognized to the holders of New York Common Stock as a result of the consummation of the Reincorporation, and no gain or loss will be recognized by the Company or KORU Delaware. The basis of the acquired assets in the hands of KORU Delaware will be the same as the Company’s basis in such assets. Each former holder of New York Common Stock will have the same basis in Delaware Common Stock received by that holder pursuant to the Reincorporation as that holder has in New York Common Stock held by that holder at the time the Reincorporation is consummated. Each shareholder’s holding period with respect to the Delaware Common Stock will include the period during which that shareholder held the corresponding New York Common Stock, provided the latter was held by such holder as a capital asset at the time the Reincorporation was consummated.
Accounting Treatment
The Reincorporation would be accounted for as a reverse merger under which, for accounting purposes, KORU Delaware would be considered the acquirer and would be treated as the successor to the Company’s historical operations. Accordingly, the Company’s historical financial statements would be treated as the financial statements of KORU Delaware.
- 11 -
Significant Changes in the Company’s Charter and By-Laws to be Implemented by the Reincorporation
The New Charter, attached hereto as Appendix C, and the New By-laws, attached hereto as Appendix D, differ in a number of respects from the Restated Certificate of Incorporation of Repro Med Systems, Inc. (the “Current Charter”) and the Amended and Restated By-laws of Repro Med Systems, Inc. (the “Current Bylaws”), respectively, copies of which have been filed with the Securities and Exchange Commission and are also available for inspection by our shareholders upon reasonable notice during regular business hours, at the Company’s principal executive offices located at 24 Carpenter Road, Chester, New York, 10918. Despite the differences between the Current Charter, the Current Bylaws, and the laws of the State of New York which currently govern the Company, and the New Charter, the New Bylaws, and the laws of the State of Delaware which govern KORU Delaware, your rights as shareholders will not be materially affected by the Reincorporation.
The following discussion briefly summarizes some of the more significant differences between the Current Charter and Current Bylaws of the Company and the New Charter and New Bylaws of KORU Delaware. The following summary does not purport to be a complete statement of the respective rights of holders of New York Common Stock and Delaware Common Stock, and is qualified in its entirety by reference to the Current Charter and Current Bylaws of the Company and the New Charter and New By-laws of KORU Delaware, respectively.
Business Purpose: Under the Current Charter the Company’s business purposes to be conducted or promoted is set forth with specificity. The New Charter, on the other hand, sets forth a broad statement of purpose that permits KORU Delaware to engage in any lawful activity consistent with the General Corporation Law of the State of Delaware.
Tie-Breaking Director and Committee Votes: Under the New Charter, if the Board of Directors or a committee established by the Board of Directors, considers an action that results in an equal number of votes for and against such action, the chairman of the Board of Directors, or the chairman of such committee, as applicable, shall be entitled to cast a tie-breaking vote with respect to such action. The Current Charter of the Company contains no such method for breaking a tie under similar circumstances.
Business combinations with Interested Shareholders: Both of the NYBCL and DGCL impose certain restrictions on business combinations with interested shareholders as summarized below in the Comparative Summary of Rights and Obligations Under New York and Delaware Law. Both Delaware and New York law permit a corporation to opt out of, or choose not to be governed by, the statute setting forth such restrictions by expressly stating so in its certificate of incorporation. Under the New Charter KORU Delaware will opt out of being governed by such restrictions under the DGCL, whereas under the Current Charter, the Company, did not elect to opt out of such restrictions under the NYBCL.
Limitations on Shareholders Demand for Special Meeting: The Current Bylaws limit the shareholders’ rights to demand a special meeting unless such demand is made by shareholders holding a specified percentage of the company’s shares entitled to vote on the matter. In addition to the ownership percentage threshold requirement for shareholders’ to demand a special meeting, the New Bylaws impose additional non-ownership related limitations on the shareholders' right to demand a shareholder meeting, including but not limited to, that the shareholder’s proposal must not be the same business included for consideration at an annual meeting being held within 90 days after the receipt of the shareholder’s demand notice, be proper subject matter for shareholder consideration and not be similar to a proposal that was presented to the shareholders at a previous meeting held within 120 days before the delivery of the request for a special meeting.
Adjournment of Shareholders Meetings: Under the Current Bylaws, at any meeting of the shareholders where a quorum shall not be present or represented, the shareholders present in person or represented by proxy, are entitled, by the affirmative vote of a majority in voting power thereof, to adjourn the meeting. The New Bylaws in addition to the shareholders’ rights to adjourn, also authorizes the chair of the meeting to adjourn such meeting where a quorum shall not be present or represented in a similar manner.
Annual Election of Certain Officers: Under the New Bylaws, the board of directors, as soon as practicable after each annual meeting of the shareholders, shall elect a chairman of the board, chief executive and a treasurer, and in the board’s discretion, such other officers in accordance with the New Bylaws. The Current Bylaws, on the other hand, do not direct the board of directors of the Company to make such annual appointments.
Forum for Adjudication of Disputes: Under the New Bylaws, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for certain claims or actions related to KORU Delaware, such claims shall include but not be limited to, derivative claims, claims for breach of officer and director fiduciary duties and claims related to the New Charter and New Bylaws. The Company under the Current Bylaws and Charter did not so designate a sole and exclusive jurisdiction for such claims.
- 12 -
Comparative Summary of Rights and Obligations Under New York and Delaware Law
In addition, there are some material differences between the NYBCL and the DGCL which are reflected in the chart below. This chart does not address each difference between the NYBCL and the DGCL but summarizes those provisions which the Company believes are most relevant to our existing shareholders. This chart is not intended as an exhaustive list of all the provisions of and differences between the two states’ corporate laws, and is qualified in its entirety by reference to NYBCL and the DGCL.
| Provision | New York | Delaware |
| Transactions with officers and directors |
Under the NYBCL, no contract or other transaction between a corporation and one or more of its directors, or between a corporation and any other corporation, firm, association or other entity in which one or more of its directors are directors or officers, or have a substantial financial interest, shall be either void or voidable for this reason alone or by reason alone that such director or directors are present at the meeting of the board, or of a committee thereof, which approves such contract or transaction, or that his or their votes are counted for such purpose, if:
(a) The material facts as to such director’s interest in such contract or transaction and as to any such common directorship, officership or financial interest are disclosed in good faith or known to the board or committee, and the board or committee approves such contract or transaction by a vote sufficient for such purpose without counting the vote of such interested director or, if the votes of the disinterested directors are insufficient to constitute an act of the board, by unanimous vote of the disinterested directors; or
(b) The material facts as to such director’s interest in such contract or transaction and as to any such common directorship, officership or financial interest are disclosed in good faith or known to the shareholders entitled to vote thereon, and such contract or transaction is approved by vote of such shareholders; or
(c) The contract or transaction was fair and reasonable as to the corporation at the time it was approved by the board, a committee or the shareholders. |
Under the DGCL, no contract or transaction between a corporation and one or more of its directors or officers, or between a corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers, are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee which authorizes the contract or transaction, or solely because any such director’s or officer’s votes are counted for such purpose, if:
(a) The material facts of such relationship or interest are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or
(b) The material facts of such relationship or interest are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or
(c) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee or the shareholders. |
| Election and removal of directors |
The NYBCL requires that the corporation have one or more directors. The directors are to be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present, unless the certificate of incorporation provides otherwise.
Under the NYBCL, only the shareholders may remove a director without cause, and this only if the certificate of incorporation or bylaws so provide. Any and all directors can be removed for |
The DGCL states that the corporation must have one or more directors. The directors are elected by a plurality of the votes present at the meeting, either in person or by proxy, and entitled to vote on the election of directors.
Under the DGCL, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except 1) if the certificate of incorporation so |
- 13 -
|
cause either by shareholders or, if the certificate or the bylaws so allow, by the board of directors. The NYBCL also provides that if a director is elected by a class vote or cumulative voting, such director may never be removed by the board.
Under the NYBCL, if a director resigns or is removed for cause, then the board may fill the vacancy, but if a director is removed without cause, shareholders must fill the vacancy. Newly created directorships resulting from an increase in the number of directors may be filled by the board. |
provides, any director or the entire board of directors of a corporation with a classified board of directors may be removed, only for cause, by the holders of a majority of shares entitled to vote at an election of directors, and except 2) if the corporation has cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against such director’s removal would be sufficient to elect such director if then cumulatively voted at an election of the entire board of directors, or, if there be classes of directors, at an election of the class of directors of which such director is a part. | |
| Inspection of books and records | Under the NYBCL, any shareholder of record may, after at least five business days’ prior written notice, inspect and copy of the minutes of the corporation’s shareholders’ proceedings and record of shareholders and make extracts therefrom for any purpose reasonably related to such person’s interest as a shareholder. | The DGCL permits shareholders to inspect and make extracts from the corporation’s books and records for any proper purpose. Under the DGCL, the shareholder, in person or by attorney or other agent, must make demand for such inspection in writing and under oath stating the purpose of the demand. |
| Limitation on liability of directors; indemnification of officers and directors |
Under the NYBCL, the corporation’s certificate of incorporation can eliminate or limit directors’ personal liability to the corporation or its shareholders for breach of their duty of care. However, a corporation may not limit directors’ liability in certain circumstances, such as action taken in bad faith, intentional misconduct or violation of the duty of loyalty.
NYCBL imposes statutory liability upon the directors if they vote or concur in one of the following: (i) declaring a dividend or other distribution contrary to the NYBCL or certificate of incorporation; (ii) repurchasing by the corporation of its own shares contrary to the NYBCL or certificate of incorporation: (iii) the distribution of assets to shareholders after dissolution of the corporation without paying or adequately providing for all known liabilities of the corporation, excluding any claims not filed by creditors within the time limit set in a notice given to creditors; (iv) making of any loan contrary to section 714 of NYBCL.
Under the NYBCL, a corporation may indemnify any person made, or threatened to be made, a party to an action or proceeding (other than one by or in the right of the corporation to procure a judgment in its favor), whether civil or criminal, including an action by or in the right of any other corporation of any type or kind, by reason of the fact that he was a director or officer of the corporation, or served such other corporation in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, |
The DGCL permits corporations to adopt provisions in their certificate of incorporation limiting or eliminating certain monetary liability of directors to the corporation or its shareholders. However, the DGCL does not permit limitation of the liability of a director for: (a) breaching the duty of loyalty to the corporation or its shareholders; (b) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (c) any transaction in which a director derived an improper personal benefit; or (d) paying an unlawful dividend or approving an unlawful stock repurchase.
Under the DGCL, corporations may indemnify any person made a party to any third-party action or proceeding by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or was serving in a similar capacity for another corporation at the corporation’s request, as long as that person: (1) has acted in good faith; (2) has acted in a manner reasonably believed to be in or not opposed to the best interests of the corporation; and (3) in the case of criminal proceedings, had no reasonable cause to believe that his or her conduct was unlawful. Unless judicially authorized, corporations may not indemnify a person in connection with a proceeding by or in the right of the corporation in which the person was adjudged liable to the corporation. However, a corporation must indemnify an officer or director “to the extent” the person is successful in defending himself or herself. |
- 14 -
| including attorneys’ fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the corporation and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his conduct was unlawful. | Corporations may advance expenses to officers and directors upon receipt of an undertaking by or on behalf of the person to repay advanced expenses if it is ultimately determined that the party is not entitled to be indemnified by the corporation. In such circumstances, the DGCL does not require that the undertaking be secured or that the corporation make a determination of ability to repay. | |
| Voting rights with respect to extraordinary corporate transactions |
Under the NYBCL, the board of each constituent corporation, upon adopting a plan of merger or consolidation, shall submit such plan to a vote of shareholders.
For corporations not in existence on February 22, 1998 or where the certificate of incorporation of which expressly provides, the approval of the merger shall require the majority of the shares entitled to vote. For corporations in existence on February 22, 1998, the approval of the merger shall require two-thirds of the votes of all outstanding shares entitled to vote.
In a merger between a parent and a subsidiary corporation (in which the parent owns at least 90% of the outstanding shares), there is no requirement of shareholder approval from either corporation, provided the subsidiary is merged into a parent corporation.
Notwithstanding shareholder authorization and at any time prior to the filing of the certificate of merger or consolidation, the plan of merger or consolidation may be abandoned pursuant to a provision for such abandonment, if any, contained in the plan of merger or consolidation. |
Delaware law requires authorization by an absolute majority of outstanding shares entitled to vote, as well as approval by the board of directors, with respect to the terms of a merger or a sale of all or substantially all of the assets of the corporation.
In a merger between a parent and a subsidiary corporation (in which the parent owns at least 90% of the subsidiary's outstanding stock), there is no requirement of shareholder approval from either corporation, provided the subsidiary is merged into a parent corporation.
Delaware law does not require a shareholder vote of the surviving corporation in a merger (unless the corporation provides otherwise in its certificate of incorporation) if: (a) the plan of merger does not amend the existing certificate of incorporation; (b) each share of stock of the surviving corporation outstanding immediately before the effective date of the merger is an identical outstanding share after the merger; and (c) either (i) no shares of common stock of the surviving corporation and no shares, securities or obligations convertible into such stock are to be issued or delivered under the plan of merger, or (ii) the authorized unissued shares or shares of common stock of the surviving corporation to be issued or delivered under the plan of merger plus those initially issuable upon conversion of any other shares, securities or obligations to be issued or delivered under such plan do not exceed 20% of the shares of common stock of such constituent corporation outstanding immediately prior to the effective date of the merger. |
| Dividends | Under the NYBCL, corporations may declare and pay dividends or make other distributions in cash or bonds or its property, including the shares or bonds of other corporations, on its outstanding shares, except when the corporation is insolvent or would thereby be made insolvent, or when the declaration, payment or distribution would be contrary to any restrictions contained in the | Under the DGCL, corporations may pay dividends out of surplus (as defined below) and, if there is no surplus, out of net profits for the current and/or the preceding fiscal year, unless the net assets of the corporation are less than the capital represented by issued and outstanding stock having a preference on asset distributions. Surplus is defined under the |
- 15 -
|
certificate of incorporation.
Dividends may be declared or paid and other distributions may be made either (1) out of surplus, so that the net assets of the corporation remaining after such declaration, payment or distribution shall at least equal the amount of its stated capital, or (2) in case there shall be no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. |
DGCL as the excess of the net assets over capital, as such capital may be adjusted by the board of directors, but not below the aggregate par value of a corporation’s outstanding shares. | |
| Appraisal rights; dissenter’s rights |
Under the NYBCL, dissenting holders of common stock who follow prescribed statutory procedures are entitled to appraisal rights in certain circumstances, including any plan of merger or consolidation to which the corporation is a party, a share exchange, and any sale, lease, exchange or other disposition of all or substantially all of the assets of a corporation which requires shareholder approval, except that the rights shall not be available:
(i) to a shareholder of the parent corporation in a merger between a parent and a subsidiary corporation; or
(ii) to a shareholder of the surviving corporation in a merger authorized by this article, other than a merger specified above, unless such merger effects one or more of certain specified changes in the rights of the shares held by such shareholder; or
(iii) to a shareholder for the shares of any class or series of stock, which shares or depository receipts, at the record date fixed to determine the shareholders entitled to receive notice of the meeting of shareholders to vote upon the plan of merger or consolidation, were listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. |
Under the DGCL, a shareholder of a corporation only has appraisal rights when objecting to certain mergers. And a shareholder does not have appraisal rights in connection with a merger or consolidation if: (a) the shares of the corporation are (1) listed on a national securities exchange; (2) held of record by more than 2,000 shareholders; or (b) the corporation will be the surviving corporation of the merger and approval of the merger does not require the vote of the shareholders of the surviving corporation.
Shareholders of Delaware corporations are entitled to appraisal rights in the case of a merger or consolidation if an agreement of merger or consolidation requires the shareholder to accept in exchange for its shares anything other than: (a) shares of stock of the corporation surviving or resulting from the merger or consolidation; (b) shares of any other corporation that on the effective date of the merger or consolidation will be either: (1) listed on a national securities exchange; (2) held of record by more than 2,000 shareholders; (c) cash in lieu of fractional shares of the corporation; or (d) any combination thereof.
Under the DGCL, the corporation must pay to the dissenting shareholder the fair value of the shares upon completion of the appraisal proceedings. |
| Shareholders’ consent without a meeting | Under the NYBCL, any action may be taken without a meeting on written consent, setting forth the action so taken, signed by the holders of all outstanding shares entitled to vote thereon or, if the certificate of incorporation so permits, signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. | Under the DGCL, unless otherwise provided in the certificate of incorporation, a corporation may take any action without a meeting if consents are received by the shareholders having not less than the minimum number of votes necessary to approve the action at a meeting. |
- 16 -
| Amendment to charter |
Under the NYBCL, any amendment or change of the certificate of incorporation may be authorized by vote of the board, followed by vote of a majority of all outstanding shares entitled to vote in a meeting of shareholders. The certificate may provide for a greater vote than would be necessary under the NYCBL.
However, any one or more of the following changes may be authorized solely by the board:
(1) To specify or change the location of the corporation’s office.
(2) To specify or change the post office address to which the secretary of state shall mail a copy of any process against the corporation served upon him.
(3) To make, revoke or change the designation of a registered agent, or to specify or change the address of its registered agent. |
The DGCL provides that the certificate of incorporation of a Delaware corporation may be amended upon adoption by the board of directors of a resolution setting forth the proposed amendment and declaring its advisability, followed by the affirmative vote of a majority of the outstanding shares entitled to vote. It also provides that a certificate of incorporation may provide for a greater vote than would otherwise be required by the DGCL. |
| Amendment to bylaws | Under the NYBCL, a corporation’s bylaws may be amended by the vote of the holders of a majority of the votes cast with respect to such amendment (rather than a majority of the shares outstanding) or, if permitted under the corporation’s certificate of incorporation or a bylaw adopted by the shareholders, by the board of directors. | Under the DGCL, the vote of a majority of the shares outstanding is required to adopt, amend or repeal the bylaws or, if permitted under the corporation’s certificate of incorporation, the board of directors may take such action, subject to the power of the shareholders to reject or modify any such action by the board. |
| Business combinations with interested shareholders |
Under the NYBCL, an interested shareholder is generally prohibited from entering into certain types of business combinations with a New York corporation for a period of five years after becoming an interested shareholder, unless the board of directors approves either the business combination or the acquisition of stock by the interested shareholder before the interested shareholder acquires his or her shares.
An “interested shareholder” under the NYBCL is generally a beneficial owner of at least 20% of the corporation’s outstanding voting stock. “Business combinations” under the NYBCL include mergers and consolidations between corporations or with an interested shareholder; sales, leases, mortgages or other dispositions to an interested shareholder of assets with an aggregate market value which either equals 10% or more of the corporation’s consolidated assets or outstanding stock, or represents 10% or more of the consolidated earning power or net income of the corporation; issuances and transfers to an interested shareholder of stock with an aggregate market value of at least 5% of the aggregate market value of the outstanding stock of the corporation; liquidation or |
The DGCL generally prohibits an interested shareholder from entering into certain types of business combinations with a Delaware corporation for three years after becoming an interested shareholder. An “interested shareholder” under DGCL is any person other than the corporation and its majority-owned subsidiaries who owns at least 15% of the outstanding voting stock, or who owned at least 15% within the preceding three years, and this definition includes affiliates of the corporation.
The prohibited combinations include:
(i) Mergers or consolidations;
(ii) Sales, leases, exchanges or other dispositions of 10% or more of:
(1) the aggregate market value of all assets of the corporation, or
(2) the aggregate market value of all the outstanding stock of the corporation;
(iii) Issuances or transfers by the corporation of its |
- 17 -
|
dissolution of the corporation proposed by or in connection with an interested shareholder; reclassification or recapitalization of stock that would increase the proportionate stock ownership of an interested shareholder; and the receipt by an interested shareholder of any benefit from loans, guarantees, pledges or other financial assistance or tax benefits provided by the corporation.
After a five-year period, NYBCL allows such business combinations if approved by a majority of the voting stock not owned by the interested shareholder or by an affiliate or associate of the interested shareholder. Business combinations are also permitted when certain statutory “fair price” requirements are met. |
stock that would increase the proportionate share of stock owned by the interested shareholder;
(iv) Receipt by the interested shareholder of the benefit of loans, advances, guarantees, pledges or other financial benefits provided by the corporation;
(v) Any other transaction, with certain exceptions, that increases the proportionate share of the stock owned by the interested shareholder.
A Delaware corporation may elect to waive the above restriction in its certificate of incorporation. In addition, the DGCL restriction on business transactions with interested shareholders does not apply in the following cases:
(i) If, before the shareholder became an interested shareholder, the board of directors approved the business combination or the transaction that resulted in the shareholder becoming an interested shareholder;
(ii) If, after the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, subject to technical calculation rules; and
(iii) If, on or after the time the interested shareholder became an interested shareholder, the board of directors approved the business combination, and at least two-thirds of the outstanding voting stock that is not owned by the interested shareholder also ratified the business combination at a shareholders’ meeting. | |
| Preemptive rights | Under the NYBCL, for corporations formed before February 22, 1998, shareholders are generally entitled to preemptive rights in connection with certain types of stock issuances by the corporation, unless the certificate of incorporation expressly limits or eliminates preemptive rights. For corporations formed on or after February 22, 1998, such as the Company, preemptive rights do not exist, unless expressly provided in the certificate of incorporation. | Under the DGCL, the issuance of shares does not result in preemptive rights of shareholders, unless the certificate of incorporation expressly provides for such rights. |
| Loans to, and guarantees of obligations of, directors | Under the NYBCL, a corporation may not lend money to, or guarantee the obligation of, a director unless (1) the shareholders (other than the interested director) approve the transaction; or (2) for corporations in existence on February 22, 1998, if the certificate of incorporation so provides, and with respect to any corporation | Under the DGCL, a board of directors may authorize loans by the corporation to, and guarantees by the corporation of any obligations of, any director of the corporation who is also an officer or other employee of the corporation whenever, in the judgment of the board of directors, such loan or guarantee may reasonably |
- 18 -
|
formed after February 22, 1998, if the board determines that the loan or guarantee benefits the corporation and either approves the specific loan or guarantee or a general plan authorizing loans and guarantees.
The NYBCL provides that a guarantee may not be given by a New York corporation, if not in furtherance of its corporate purposes, unless it is authorized by two-thirds of the votes of all outstanding shares entitled to vote. |
be expected to benefit the corporation.
The DGCL contains no provision similar to the NYBCL restricting guarantees by a corporation. | |
| Expiration of proxies | Unless the proxy provides for a longer period, a proxy under the NYBCL can be voted or acted upon for eleven months. | The DGCL provides that the appointment of a proxy with no expiration date may be valid for up to three years, but that a proxy may be provided for a longer period. Furthermore, a duly executed proxy may be irrevocable if it states that it is irrevocable and if it is coupled with an interest in the stock itself or an interest in the corporation generally sufficient in law to support an irrevocable power. |
| Issuance of rights and options to directors, officers and employees | Under the NYBCL, the issuance of any stock rights or stock options, as well as plans to issue rights or options, to directors, officers or employees must be authorized as required by the policies of all stock exchanges on which the corporation’s shares are listed, or if the corporation’s shares are not so listed, then by a majority of the voting shares. | Under the DGCL, shareholder approval is not required, and such an action can be authorized by the board of directors. |
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSAL 4 TO CHANGE THE COMPANY’S STATE OF INCORPORATION FROM NEW YORK TO DELAWARE THOUGH A MERGER. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED BY THE COMPANY WILL BE VOTED “FOR” THIS PROPOSAL.
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act added Section 14A to the Securities Exchange Act of 1934, as amended (“Exchange Act”), which requires that we provide shareholders with the opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers. Commonly known as a “say-on-pay” vote, this proposal gives our shareholders the opportunity to express their views on our executive compensation policies and programs and the compensation paid to the named executive officers. At the Company’s 2019 Annual Meeting of Shareholders, 95% of the votes cast on the proposal were in favor of the Board of Directors’ recommendation to hold an advisory vote on executive compensation every year. The Board of Directors and the Nominating and Governance Committee (then, our compensation committee) reviewed these results and determined that the Company’s shareholders should hold an advisory vote on executive compensation every year. Accordingly, a say-on-pay vote is being taken at the 2022 Annual Meeting.
Our general compensation philosophy is that we believe that the most effective compensation program is one that is designed to reward all of our employees, including but not limited to, our named executive officers, for the achievement of our short-term and long-term strategic goals using a pay for performance system that ultimately drives toward the achievement of increased total shareholder return. Through this strategy, we seek to closely align the interests of our named executive officers with the interests of our shareholders. Our named executive officers’ total compensation is comprised of a mix of base salary, performance-based cash bonus, long-term incentive compensation, retirement and other benefits intended to fulfill these objectives.
We are asking our shareholders to indicate their support for the compensation of our named executive officers as described in this Proxy Statement by approving the following resolution at the Annual Meeting:
- 19 -
“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation paid to the named executive officers, as disclosed in the Company’s proxy statement for the 2022 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation tables and accompanying narrative disclosure.”
We strongly encourage shareholders to read “Executive Compensation” in this Proxy Statement, including the tabular and narrative disclosure regarding executive compensation, for additional details.
The vote on this proposal is advisory and therefore not binding on the Company, the Board of Directors or the Compensation Committee. However, the Board of Directors and the Compensation Committee will review and consider the voting results in future decisions regarding executive compensation.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 5.
UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED BY THE COMPANY WILL BE
VOTED “FOR” THIS PROPOSAL.
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The Company’s independent registered public accounting firm for the fiscal year ended December 31, 2021 was the firm of McGrail Merkel Quinn & Associates, P.C. (“McGrail Merkel”). The Audit Committee has reappointed and recommends McGrail Merkel as our independent registered public accountants for the fiscal year ending December 31, 2022. McGrail Merkel has served as our independent registered public accountants since October 31, 2014 and, most recently, completed the audit of our financial statements for the fiscal year ended December 31, 2021.
One or more representatives of McGrail Merkel are expected to be available at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and to be available to respond to appropriate questions from shareholders.
Audit Fee
The following table shows the aggregate fees billed for professional services rendered by McGrail Merkel for the fiscal years ended December 31, 2021 and December 31, 2020:
| Fees Category | Fiscal Year Ended December 31, 2021 | Fiscal Year Ended December 31, 2020 |
| Audit Fees | $42,500 | $42,500 |
| All Other Fees | $ 0 | $ 3,000 |
Audit fees consist of aggregate fees billed for professional services rendered for the audit of our annual financial statements and review of the interim financial statements included in quarterly reports or services that are normally provided by the independent auditors in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2021 and December 31, 2020, respectively. All Other Fees were for professional services rendered for an opinion letter after the capital raise in 2020.
The Audit Committee of the Board of Directors is responsible for the appointment, compensation, and oversight of the work of the independent auditors and has approved in advance any services to be performed by the independent auditors, whether audit-related or not. The Audit Committee has reviewed each proposed engagement to determine whether the provision of services is compatible with maintaining the independence of the independent auditors. All of the Audit Fees shown above were pre-approved by the Audit Committee.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 6.
UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED BY THE
COMPANY WILL BE VOTED “FOR” THIS PROPOSAL.
- 20 -
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, as of March 1, 2022, the number of shares of common stock beneficially owned by each person owning more than 5% of the outstanding shares, by each named executive officer, director and director nominee, and by all executive officers and directors as a group. Except as otherwise noted, the address of each person is c/o Repro Med Systems, Inc., 24 Carpenter Road, Chester, NY, 10918.
We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.
Percentage ownership is based on 44,671,160 shares of common stock outstanding at March 1, 2022. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, except as indicated by the footnotes below, we deemed outstanding shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of March 1, 2022, to be outstanding ignoring the withholding of shares of common stock to cover applicable taxes. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. We did not deem outstanding shares of common stock issuable as directors’ fees or pursuant to employment contracts within 60 days after March 1, 2022, as the number of shares is not able to be calculated at this time. Beneficial ownership representing less than 1% is denoted with an asterisk (*).
The information provided in the table is based on our records, information filed with the SEC, and information provided to us, except where otherwise noted.
| Name of Principal Shareholders and Identity of Group | Shares Beneficially Owned |
Percent of Class |
Notes: | |||||
| Joseph M. Manko, Jr. | 10,652,019 | 2 | 4% | (1) | ||||
| Kathy S. Frommer | 1,729,918 | 4 | % | (2) | ||||
| Karen Fisher | 772,906 | 2 | % | — | ||||
| Manuel A. Marques | 593,080 | 1 | % | — | ||||
| Daniel S. Goldberger | 565,113 | 1 | % | — | ||||
| Linda Tharby | 333,968 | * | — | |||||
| James M. Beck | 212,360 | * | — | |||||
| R. John Fletcher | 102,128 | * | — | |||||
| David W. Anderson | 53,525 | * | — | |||||
| Robert T. Allen | 36,905 | * | — | |||||
| Shahriar (Shar) Matin | 15,252 | * | — | |||||
| Donna French | 11,829 | * | — | |||||
| Robert A. Cascella | — | * | — | |||||
| All Directors and Executive Officers as a Group | 15,079,003 | 34 | % | — | ||||
| Horton Capital Management, LLC | 10,652,019 | 24 | % | (1) | ||||
| First Light Asset Management, LLC | 5,807,647 | 13 | % | (3) | ||||
| Archon Capital Management LLC | 2,856,502 | 6 | % | (4) | ||||
| * Less than 1% | ||||||||
__________
| (1) | Based upon Schedule 13D/A filed with the SEC on January 27, 2022 and other information provided to us by HCM, each of Mr. Manko and Horton Capital Management, LLC, a Delaware limited liability company (“HCM”), may be deemed to beneficially own 10,652,019 shares of common stock, including 7,368,426 shares of common stock held by Horton Capital Partners Fund, LP, a Delaware limited partnership (“HCPF”), 3,283,593 shares of common stock held by Horton Freedom, LP, a Delaware limited partnership (“HFF”). Pursuant to investment management agreements, HCM maintains investment and voting power with respect to shares of common stock held by HCPF and HFF. Despite the delegation of investment and voting power to HCM, Horton Capital Partners LLC, a Delaware limited liability company (“HCP”), may be also deemed to be the beneficial owner of shares of common stock held by HCPF and HFF because HCP has the right to acquire investment and voting power through termination of investment management agreements with HCM. HCP is the general partner of HCPF and HFF. Mr. Manko, a director of the Company, is the managing member of both HCM and HCP. Each of HCM, HCP, and Mr. Manko disclaims beneficial ownership of the shares of common stock held by HCPF and Horton Freedom. The address of Mr. Manko, HCM, HCP, HCPF and HFF is 1717 Arch Street, 39th Floor, Philadelphia, PA 19103. |
- 21 -
| (2) | Includes 1,008,000 shares of common stock held by a family member over which Ms. Frommer has voting and dispositive power pursuant to a power of attorney. |
| (3) | Based upon a Schedule 13G/A filed on February 14, 2022, with the Securities and Exchange Commission and additional information provided to us by First Light Asset Management, LLC, a Delaware limited liability company (the “Manager”), First Light Focus Fund, LP, a Delaware limited partnership (the “Fund”), is the direct holder of 5,807,647 shares. First Light Focus Fund GP, LLC, a Delaware limited liability company (the “General Partner”), may be deemed to be a beneficial owner of these shares because it is the sole general partner of the Fund. The Manager acts as an investment adviser to certain persons holding separately managed accounts with the Manager, each of whom has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, those shares. The Manager may also be deemed to be the beneficial owner of these shares because it acts as an investment adviser to certain private funds. Mr. Arens may also be deemed to be the beneficial owner of these shares because he controls the Manager in his position as managing member and majority owner of the Manager. Mr. Arens also directly holds 33,596 Shares in an individual capacity with sole control and 76,371 Shares held in a joint account over which he shares control. The Manager and Mr. Arens are filing this Schedule 13G/A with respect to these Shares pursuant to Rule 13d-1(b) under the Act. The address of the Manager, the Fund, the General Partner and Mr. Arens is 3300 Edinborough Way #201, Edina, MN 55435. |
| (4) | Based upon a Schedule 13G filed on February 14, 2022 with the Securities and Exchange Commission, Archon Capital Management LLC, a Washington limited liability company, is the relevant entity for which Constantinos Christofilis may be considered a control person. |
BOARD STRUCTURE AND GOVERNANCE
Board Committees and Meetings
Our Board of Directors has an Audit Committee, a Nominating and Governance Committee and a Compensation Committee.
Audit Committee. The Audit Committee recommends the appointment of our independent registered public accountants, reviews our internal accounting procedures and financial statements and consults with and reviews the services provided by our independent registered public accountants, including the results and scope of their audit. The Audit Committee is currently comprised of Messrs. Anderson (chair), Allen and Beck and Dr. French. Each member of this committee is “independent” within the meaning of applicable SEC rules and standards of the Nasdaq Stock Market LLC (the “Nasdaq”). The Board of Directors has designated Mr. Anderson as the audit committee financial expert, as currently defined under the SEC rules.
The Audit Committee operates under a formal charter adopted by the Board of Directors that governs its duties and conduct. Copies of the charter can be obtained free of charge from the Company’s website at www.korumedical.com.
The Audit Committee held seven meetings including two special meetings in connection with meetings of the full Board during the fiscal year ended December 31, 2021.
Nominating and Governance Committee. The Nominating and Governance Committee is responsible for:
| • | Periodically assessing the Company’s Corporate Governance Guidelines and Code of Ethics | |
| • | Recommending a Chairperson of the Board | |
| • | Recommending members and Chairpersons of Board committees | |
| • | Recommending new board members for nomination to the Board |
This committee currently consists of Messrs. Manko (chair), Allen and Fletcher. Each member of this committee is “independent” within the meaning of applicable SEC rules and the standards of the Nasdaq.
The Nominating and Governance Committee operates under a formal charter adopted by the Board of Directors that governs its duties and conduct. Copies of the charter can be obtained free of charge from the Company’s website at www.korumedical.com.
The Nominating and Governance Committee held seven meetings during the fiscal year ended December 31, 2021.
- 22 -
Compensation Committee. The Compensation Committee reviews and recommends to our Board of Directors the compensation and benefits for our Chief Executive Officer, administers our 2015 Stock Option Plan, as amended (the “2015 Stock Option Plan”) and 2021 Omnibus Equity Incentive Plan and makes recommendations to the Board with respect thereto, and may review management’s policies relating to compensation and benefits for our employees. The Compensation Committee reviews and makes recommendations to the Board regarding any employment agreement, severance agreement, change in control agreement or provision, separation agreement or deferred compensation arrangement that is to be entered into with the Chief Executive Officer or any other executive officer. Our Chief Executive Officer reviews the performance of each other executive officer on an annual basis. The conclusions and recommendations based on these reviews, including with respect to salary adjustments, annual bonus award amounts and options awards, are reviewed by the Committee and subject to Board approval.
The Committee annually reviews and makes recommendations to the Board regarding the compensation paid to the Company’s directors. Such review includes any fees paid for attendance at meetings of the Board and any of its committees and grants of stock options or stock.
This committee currently consists of Messrs. Beck (chair), Manko and Ms. Frommer. Each member of this committee is “independent” within the meaning of applicable SEC rules and the standards of the Nasdaq.
The Compensation Committee operates under a formal charter adopted by the Board of Directors that governs its duties and conduct. Copies of the charter can be obtained free of charge from the Company’s website at www.korumedical.com.
The Compensation Committee held seven meetings during the fiscal year ended December 31, 2021.
Board of Directors. The Board of Directors held eight meetings including one special meeting during the fiscal year ended December 31, 2021.
Meeting Attendance. During the fiscal year ended December 31, 2021, each director attended 75% or more of the aggregate number of meetings held by the Board of Directors and the committees of the Board of Directors on which such director served, if any, during the period for which such person served as a director. All members of the Board of Directors at the time attended the 2021 Annual Meeting.
Corporate Governance
The Company, with the oversight of the Board of Directors and its committees, operates within a comprehensive plan of corporate governance for the purpose of defining independence, assigning responsibilities, setting high standards of professional and personal conduct and assuring compliance with such responsibilities and standards. The Company regularly monitors developments in the area of corporate governance.
Code of Ethics
The Company has a Code of Ethics applicable to all employees, including the principal executive officer, principal financial officer, principal accounting officer or controller. The Code of Ethics is available on the Company’s website at www.korumedical.com/investors/corporate-governance/governance-documents//code_of_ethics.pdf. The Company intends to disclose future amendments to certain provisions of the Code of Ethics, and waivers of the Code of Ethics granted to the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, if any, on the website at www.korumedical.com within four business days following the date of any amendment or waiver. A printed copy will be sent, without charge, to any shareholder who requests it by writing to the Chief Financial Officer of Repro Med Systems, Inc., 24 Carpenter Road, Chester, NY 10918.
Board Leadership Structure and Risk Oversight
Our governing documents enable the Board to determine the appropriate Board leadership structure for the Company and allow the roles of Chairman of the Board and Chief Executive Officer to be filled by the same or different individuals. This approach allows the Board flexibility to determine whether the two roles should be separate or combined based upon the Company’s needs and circumstances and the Board’s assessment of the Company’s leadership from time to time. Our Amended and Restated By-laws (our “Bylaws”) provide that, in the event the roles of Chairman of the Board and Chief Executive Officer are filled by the same individual, or if the Chairman is not considered by the Board to be an independent director, the independent directors will elect one of their number to serve as Lead Director. The Lead Director, if any, will chair meetings of independent directors, will facilitate communications between other members of the Board and the Chief Executive Officer and the Chairman, and will assume other duties which the independent directors as a whole may designate from time to time.
- 23 -
Our Bylaws provide that the primary officers of the Corporation shall be a Chairman of the Board, Chief Executive Officer and a Treasurer, each of whom shall be appointed by the Board of Directors and have such powers and duties as provided in the Bylaws or as the Board otherwise deems appropriate. Any two offices or more may be held by one person. Our Bylaws further provide that the Chairman of the Board shall preside at all meetings of the Board of Directors and shareholders, when present, and perform other such duties as the Board may designate. In the Chief Executive Officer’s absence or inability to act, the Chairman of the Board shall perform the duties and may exercise the powers of the Chief Executive Officer.
The Board of Directors believes the current separation of the Chairman of the Board and Chief Executive roles is appropriate at this time, including because it enables the Chief Executive Officer to focus on strategic leadership, execution and day-to-day management of our business, while the Chairman focuses on board-level leadership and facilitating the board’s ability to be a strategic partner with management and provide oversight and monitoring. The Board of Directors will continue to review the board’s leadership structure.
Our Board is primarily responsible for overseeing our risk management processes. The Board receives and reviews periodic reports from management, auditors, legal counsel and others, as considered appropriate regarding our assessment of risks. The Board focuses on the most significant risks facing the Company and our general risk management strategy, and also ensures that risks undertaken by the Company are consistent with the Board’s tolerance for risk. While the Board oversees our risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing the Company and that our Board leadership structure supports this approach. The Audit Committee assists our Board in its general oversight of, among other things, the Company’s policies, guidelines and related practices regarding risk assessment and risk management. As part of this endeavor, the Audit Committee is charged with reviewing and assessing the Company’s major financial, legal, regulatory and similar risk exposures and the steps that management has taken to monitor and control such exposures.
Director Independence
The Board of Directors has affirmatively determined that all of its current directors and director nominees are “independent” in accordance with the rules of the Nasdaq.
Director Nominations
The Company has a standing Nominating and Governance Committee. In making its recommendations of director candidates to the Board of Directors, the Nominating and Governance Committee will consider, at a minimum, a candidate’s qualification as “independent” under the standards applicable to the Board of Directors and each of its committees, as well as a candidate’s depth of experience, availability and potential contributions to the Board of Directors. With respect to incumbent members of the Board of Directors, the Committee will also consider the performance of each incumbent director. Candidates may come to the attention of the Nominating and Governance Committee from current directors, shareholders, officers or other sources, and the committee shall review all candidates in the same manner regardless of the source of the recommendation.
In addition to those candidates identified through its own internal processes, the Nominating and Governance Committee will consider nominees recommended by shareholders who submit their recommendations in accordance with the notice, information and consent requirements set forth in our Bylaws.
In selecting qualified candidates to serve as directors of the Company, a wide range of diversity criteria are considered, including without limitation, gender, race, ethnicity, religion, sexual orientation, physical ability and age, with the objective that the Board, as a whole, reflects a range of viewpoints, backgrounds, skills and experience. In the process of searching for qualified persons to serve on the Board, the Nominating and Governance Committee strives for the inclusion of diverse groups, knowledge, and viewpoints. To accomplish this, the Committee may retain an executive search firm to help meet the Board’s diversity objectives.
Communications from Shareholders
Shareholders may communicate with the entire board of directors or individual directors by sending an email to directors@korumedical.com. Each communication should specify the applicable director or directors to be contacted, as well as the general topic of the communication. We will initially receive and process communications before forwarding them to the director(s). We generally will not forward to the directors a communication that we determine to be primarily commercial in nature or related to an improper topic, or that requests general information about the Company.
- 24 -
The following table provides compensation information for the fiscal year ended December 31, 2021 for each member of our Board of Directors who served during that year:
2021 FISCAL YEAR DIRECTOR COMPENSATION TABLE
| Name | Fees Earned or Paid in Cash ($) |
Stock Awards ($) |
All Other Compensation ($) |
Total ($) | ||||
| Robert T. Allen | 47,471 | 37,981 | — | 85,452 | ||||
| David W. Anderson | 56,250 | 39,231 | — | 95,481 | ||||
| James M. Beck | 38,841 | 33,682 | — | 72,523 | ||||
| R. John Fletcher | 43,750 | 58,585 | — | 102,335 | ||||
| Kathy S. Frommer | 43,750 | 37,981 | — | 81,731 | ||||
| Joseph M. Manko, Jr. (1) | 50,625 | 39,231 | — | 89,856 | ||||
| Daniel S. Goldberger | 43,750 | 37,981 | — | 81,731 | ||||
| Shahriar (Shar) Matin | 38,451 | 32,682 | — | 71,133 | ||||
| Donna French | 18,544 | 22,252 | — | 40,796 |
__________
| (1) | The stock awards were issued to Horton Capital Partners Fund L.P., an affiliate of Mr. Manko. |
Effective January 1, 2021, each non-employee director of the Company (other than the Chairman of the Board) and Board advisor were eligible to receive of $75,000 annually, to be paid quarterly $12,500 in cash and $6,250 in common stock. The Chairman of the Board was eligible to receive $100,000 annually, to be paid quarterly $12,500 in cash and $12,500 in common stock. Also, the Chairman of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee were entitled to $15,000, $11,500 and $7,500, respectively, in cash per year in addition to the director compensation.
Effective May 18, 2021, each non-employee director of the Company (other than the Chairman of the Board) are eligible to receive $110,000 annually, to be paid quarterly $50,000 in cash and $60,000 in shares of common stock. The Chairman of the Board is eligible to receive $140,000 annually, to be paid $50,000 in cash and $90,000 in shares of common stock. Also, the Chairman of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee are entitled to $15,000, $11,500 and $7,500, respectively, in cash per year in addition to the director compensation.
Directors fees are payable quarterly at the end of each fiscal quarter and subject to proration for partial quarter service. The Company issued an aggregate 95,725 shares of common stock to its non-employee directors during the year ended December 31, 2021, respectively.
The summary compensation table below summarizes information concerning compensation for the fiscal years ended December 31, 2021 and 2020 of the individuals who currently serve as our President and Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, as well as our former President and Chief Executive Officer and former interim Chief Executive Officer. We refer to these individuals as our “named executive officers.”
- 25 -
Summary Compensation Table
| Name and Position | Year | Salary $ |
Bonus $ |
Stock Awards $ |
Option Awards $ |
Nonequity Incentive Plan Compensation $ |
All Other Compensation $(7) |
Total $ |
| Linda Tharby, President & CEO(1) | 2021 | 398,045 | 317,041(5) | — | — | — | 10,083 | 725,169 |
| James Beck, former interim CEO | 2021 | 113,593 | 97,636(5) | — | — | — | 113,962 | 325,191 |
| Donald B. Pettigrew, former President & CEO (2) | 2021 | 351,923 | — | — | — | — | — | 351,923 |
| 2020 | 360,000 | — | — | — | — | 18,584 | 378,584 | |
| Karen Fisher, Chief Financial Officer (3) | 2021 | 250,000 | 38,900(6) | — | — | — | 9,094 | 297,994 |
| 2020 | 250,000 | 87,500 | — | — | — | 9,583 | 347,083 | |
| Manuel Marques, Chief Operating Officer (4) | 2021 | 230,000 | 25,496(6) | — | — | — | 4,753 | 260,249 |
| 2020 | 230,000 | 80,500 | — | — | — | 11,400 | 321,900 |
__________
| (1) |
Ms. Tharby entered into an employment agreement to serve as the Company’s President and Chief Executive Officer on March 15, 2021. Pursuant to this agreement, Ms. Tharby received an annual base salary of $550,000 effective with her start date of April 12, 2021. On April 12, 2021, pursuant to such employment agreement, the Company issued Ms. Tharby three restricted stock awards as follows, each vesting subject to employment on the respective vesting date:
(1) 600,000 shares of common stock to vest vesting as follows: if the Company’s net sales growth for any of the fiscal years ended December 31, 2022, 2023, 2024 or 2025 (each, a “Target Year”) is at least the applicable net sales target set forth on the schedule to the restricted stock award agreement, then, on the applicable Vesting Date, a corresponding portion of the restricted stock award will vest as set forth on such schedule. Additionally, if net sales growth is less than any of the net sales targets set forth in such schedule in any Target Year (a “Miss Year”), vesting of the restricted stock award in the following Target Years (each such subsequent Target Year, a “Catch-up Year”) shall be further subject to the following catch-up vesting provisions: if the net sales growth in the Miss Year(s) when averaged with the net sales in each Catch-up Year(s) equals or exceeds a net sales target in any single Miss Year that has not previously been obtained, then on the applicable Vesting Date, an additional portion of the Award shall vest as if the applicable net sales target had been met in the Miss Year(s). Notwithstanding the foregoing, the restricted stock award shall automatically vest in full upon the Company maintaining, for a period of at least two consecutive fiscal quarters after January 1, 2022, at least a specified run rate over the previous four fiscal quarters, as reported in the Company’s filings pursuant to the Securities Exchange Act of 1934, as amended.
(2) 200,000 shares of common stock vesting 25% on April 12, 2022 and 25% on each twelve months thereafter.
(3) 200,000 shares of common stock, vesting as follows: (i) 50,000 shares on the first date on which the Company’s Market Capitalization for a period of 90 consecutive days has been, or there has been a Change of Control (as defined in the employment agreement) of the Company with an enterprise value of, at least $500,000,000 but less than $600,000,000; (ii) 50,000 shares on the first date on which the Company’s Market Capitalization for a period of 90 consecutive days has been, or there has been a Change of Control of the Company with an enterprise value of, at least $600,000,000 but less than $750,000,000; and (iii) 100,000 shares on the date on which the Company’s Market Capitalization for a period of 90 consecutive days has been, or there has been a Change of Control of the Company with an enterprise value of, at least $750,000,000. “Market Capitalization” shall be determined by (A) multiplying the number of shares reported as outstanding on the cover of the Company’s most recent Form 10-K or 10-Q, as applicable, as filed with the Securities and Exchange Commission, by (B) the Fair Market Value of the Common Stock (as defined in the Company’s 2015 Stock Option Plan, as amended) on each day. Notwithstanding the foregoing, no portion of the restricted stock award shall vest on or following the fifth anniversary of the award date. |
- 26 -
| (2) |
Mr. Pettigrew entered into an employment agreement to serve as the Company’s Chief Commercial Officer on September 4, 2018. Pursuant to this agreement, Mr. Pettigrew received an annual base salary, which was $325,000 until February 2, 2019, at which time he was appointed as President and Chief Executive Officer and his base salary was increased to $360,000. Pursuant to the employment agreement, Mr. Pettigrew was eligible to earn an annual bonus in accordance with our policy and procedure for granting of a specified executive bonus, which is equivalent to 50% of annual base salary based on achievement of objectives set by us as part of the annual budget process, payable by March 15 of the following year.
Under the agreement, pursuant to the Company’s 2015 Stock Option Plan, as amended, Mr. Pettigrew received non-qualified stock options to purchase up to 1,000,000 shares of common stock at a per share exercise price of $1.23 subject to vesting. Under the agreement, Mr. Pettigrew was also entitled to reimbursement for commuting expenses to and from the corporate offices, which amounts are included in all other compensation. Mr. Pettigrew resigned from his employment on January 22, 2021 and, pursuant to a separation agreement then entered into, will receive an amount equal to 12 months of his then-current annual base salary, to be paid in accordance with our normal payroll practices after the termination date, as well as premiums for Mr. Pettigrew’s health insurance as currently enrolled on the termination date. In accordance with their terms, his non-qualified stock options vested in full as of his termination date. |
| (3) | Ms. Fisher entered into an employment agreement with us on January 15, 2015, which was amended and restated effective January 1, 2020. Pursuant to the employment agreement, Ms. Fisher is eligible to earn an annual bonus in accordance with our policy and procedure for granting of a specified executive bonus, which is equivalent to 30% of annual base salary based on achievement of objectives set by us as part of the annual budget process, payable by March 15 of the following year. Effective January 1, 2019, Ms. Fisher’s annual base salary is $250,000. Pursuant to the original agreement and our 2015 Stock Option Plan, as amended, Ms. Fisher was awarded incentive stock options to purchase up to 500,000 shares of our common stock at $0.38 per share, all of which have vested. Upon termination of Ms. Fisher’s employment by us without Cause or for Good Reason (as defined in the agreement), subject to her execution of a customary general release of claims in favor of us the Company and its affiliates, Ms. Fisher will be entitled to receive an amount equal to 12 months of her then-current annual base salary, to be paid in accordance with our normal payroll practices after the termination date. Ms. Fisher will further be entitled to payment of her annual bonus, if earned. For the same 12-month period after the termination date, we will also pay premiums for Ms. Fisher’s health insurance as currently enrolled on the termination date. |
| (4) | Mr. Marques entered into an employment agreement with us on October 10, 2017 for the position of Vice President of Operations and Engineering and subsequently on December 5, 2018 was promoted to Chief Operating Officer. Pursuant to the agreement, Mr. Marques receives an annual base salary and is eligible to earn an annual bonus in accordance with our policy and procedure for granting of a specified executive bonus, which is equivalent to 30% of the annual base salary based on the achievement of objectives set by us as part of the annual budget process. Mr. Marques’ current base salary is $230,000. Pursuant to this agreement and our 2015 Stock Option Plan, as amended, Mr. Marques was awarded incentive stock options to purchase up to 250,000 shares of our common stock vesting quarterly over a four-year term and automatically if Mr. Marques’ employment is terminated by the Company without cause. Upon termination of Mr. Marques’ employment by other than for Cause (as defined in the agreement), subject to his execution of a customary general release of claims in favor of us and our affiliates, Mr. Marques will be entitled to receive an amount equal to 12 months of Mr. Marques’ then-current annual base salary, to be paid in accordance with our normal payroll practices after the termination date. Upon qualified termination following a Change in Control, all outstanding, unvested previously granted options will be treated as having accelerated vesting and become fully vested upon triggering event. If terminated without Cause within eighteen months of a Change in Control event, the cash portion of base salary shall be paid for the equivalent of eighteen months of base salary. |
| (5) | Discretionary bonus payments. |
| (6) | Guaranteed bonus payments in accordance with employment agreements. Ms. Tharby’s bonus is paid 70% in cash and 30% in shares of Company common stock with a fair market value on March 4, 2022. |
| (7) | All Other Compensation in 2021 and 2020 includes the matching contributions under our 401(k) savings plan for all executives except for Mr. Pettigrew who had commuting expenses reimbursed by the Company in 2020, and Mr. Beck who had transition consulting fees paid to him. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table sets forth information regarding the outstanding equity awards held by our named executive officers as of December 31, 2021.
- 27 -
2021 FISCAL YEAR OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
| Option Awards | Stock Awards | ||||||
| Number of Securities | Number of Securities | Number of | Market value | ||||
| Underlying | Underlying | shares of | of shares of | ||||
| Unexercised | Unexercised | Option | Option | stock that | stock that | ||
| Options | Options | Exercise | Expiration | have not | have not | ||
| Name | Exercisable (#) | Unexercisable (#) | Price ($) | Date | vested | vested ($) | |
| James Beck | 150,000 | — | 4.37 | 02/13/2031 | — | — | |
| Karen Fisher | 100,000(3) | 300,000(3) | 1.57 | 01/26/2029 | — | — | |
| Daniel S. Goldberger | 400,000(4) | 100,000(4) | 1.57 | 10/11/2028 | — | — | |
| Manual A. Marques | 75,000(5) | 150,000(5) | 1.57 | 01/26/2029 | — | — | |
| Linda Tharby | — | 1,000,000(1) | 3.875 | 03/15/2031 | 1,000,000(2) | 3,000,000 | |
__________
| (1) | Incentive stock options granted under the 2015 Stock Option Plan that vest 25% annually on anniversary date commencing March 15, 2021. |
| (2) |
200,000 shares of common stock vesting 25% on April 12, 2022 and 25% on each twelve months thereafter.
200,000 shares of common stock, vesting as follows: (i) 50,000 shares on the first date on which the Company’s Market Capitalization for a period of 90 consecutive days has been, or there has been a Change of Control (as defined in the employment agreement) of the Company with an enterprise value of, at least $500,000,000 but less than $600,000,000; (ii) 50,000 shares on the first date on which the Company’s Market Capitalization for a period of 90 consecutive days has been, or there has been a Change of Control of the Company with an enterprise value of, at least $600,000,000 but less than $750,000,000; and (iii) 100,000 shares on the date on which the Company’s Market Capitalization for a period of 90 consecutive days has been, or there has been a Change of Control of the Company with an enterprise value of, at least $750,000,000. “Market Capitalization” shall be determined by (A) multiplying the number of shares reported as outstanding on the cover of the Company’s most recent Form 10-K or 10-Q, as applicable, as filed with the Securities and Exchange Commission, by (B) the Fair Market Value of the Common Stock (as defined in the Company’s 2015 Stock Option Plan, as amended) on each day. Notwithstanding the foregoing, no portion of the restricted stock award shall vest on or following the fifth anniversary of the award date.
600,000 shares of common stock to vest vesting as follows: if the Company’s net sales growth for any of the fiscal years ended December 31, 2022, 2023, 2024 or 2025 (each, a “Target Year”) is at least the applicable net sales target set forth on the schedule to the restricted stock award agreement, then, on the applicable Vesting Date, a corresponding portion of the restricted stock award will vest as set forth on such schedule. Additionally, if net sales growth is less than any of the net sales targets set forth in such schedule in any Target Year (a “Miss Year”), vesting of the restricted stock award in the following Target Years (each such subsequent Target Year, a “Catch-up Year”) shall be further subject to the following catch-up vesting provisions: if the net sales growth in the Miss Year(s) when averaged with the net sales in each Catch-up Year(s) equals or exceeds a net sales target in any single Miss Year that has not previously been obtained, then on the applicable Vesting Date, an additional portion of the Award shall vest as if the applicable net sales target had been met in the Miss Year(s). Notwithstanding the foregoing, the restricted stock award shall automatically vest in full upon the Company maintaining, for a period of at least two consecutive fiscal quarters after January 1, 2022, at least a specified run rate over the previous four fiscal quarters, as reported in the Company’s filings pursuant to the Securities Exchange Act of 1934, as amended. |
| (3) | Incentive stock options granted under the 2015 Stock Option Plan that vest 20% annually on anniversary date commencing January 29, 2019. |
| (4) | Non-qualified stock options granted under the 2015 Stock Option Plan, of which 100,000 vested on October 12, 2018, and the remaining 400,000 will vest at the rate of 25,000 shares per completed quarter commencing with the three-month period beginning on the first day of the month following October 12, 2018. These options will immediately vest and be exercisable in full upon a Change in Control within the meaning of the Company’s 2015 Stock Option. |
| (5) | Incentive stock options granted under the 2015 Stock Option Plan that vest 25% annually on anniversary date commencing January 29, 2019. |
- 28 -
The Audit Committee of the Board of Directors has been responsible for the oversight of the integrity of the Company’s consolidated financial statements, our internal accounting and financial controls, our compliance with legal and regulatory requirements, the organization and performance of our internal audit function and the qualifications, independence and performance of our independent registered public accounting firm.
Management of the Company is responsible for establishing and maintaining internal controls and for preparing the Company’s consolidated financial statements. The independent registered public accounting firm is responsible for auditing the financial statements. It is the responsibility of the Audit Committee to oversee these activities.
Review and Discussions with Management
The Audit Committee reviewed and discussed the Company’s audited financial statements with management.
Review and Discussions with Independent Registered Public Accounting Firm
The Audit Committee discussed with McGrail Merkel Quinn & Associates, P.C the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board.
The Audit Committee also received written disclosures and the letter from McGrail Merkel Quinn & Associates, P.C required by applicable requirements of the Public Company Accounting Oversight Board regarding McGrail Merkel Quinn & Associates, P.C communications with the Audit Committee concerning independence and has discussed with McGrail Merkel Quinn & Associates, P.C their independence from the Company. The Audit Committee also reviewed and discussed the selection, application and disclosure of the critical accounting policies of the Company with McGrail Merkel Quinn & Associates, P.C.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Audit Committee
David W. Anderson, Chair
Robert T. Allen
James M. Beck
Donna French
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
None of our directors or executive officers or their associates have any substantial interest direct or indirect, by security holdings or otherwise, in the matters proposed to be approved by the shareholders as described in this Proxy Statement, except that our non-employee directors will be eligible for compensation under the Director Compensation Plan.
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our directors and executive officers, and persons who own more than ten percent (10%) of our common stock, file with the SEC reports of initial ownership of our common stock and subsequent changes in that ownership and furnish to us copies of all forms they file pursuant to Section 16(a). Based solely on a review of Forms 3, 4, and 5 furnished to us or filed with the SEC in fiscal year 2021, we believe all Section 16(a) filing requirements were timely made in the fiscal year ended December 31, 2021 except all directors filed one late Form 4 (and Joseph M. Manko, Jr, filed two late Form 4s) reporting director fees.
OTHER MATTERS BEFORE THE ANNUAL MEETING
The Board does not know of any other matters that may come before the Annual Meeting. However, if any other matters are properly presented to the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote, or otherwise act, in accordance with their judgment on such matters.
- 29 -
ELECTRONIC AVAILABILITY OF PROXY MATERIALS AND ANNUAL REPORT ON FORM 10-K
Shareholders can access this Proxy Statement and our 2021 Annual Report on Form 10-K via the Internet at https://www.cstproxy.com/KORUMEDICAL/2022 and then following the instructions outlined on the secure website. For future annual meetings of shareholders, shareholders can consent to accessing their proxy materials, including the Notice, the proxy statement and the annual report, electronically in lieu of receiving them by mail. To receive materials electronically, you will need access to a computer and an e-mail account. You will have the opportunity to revoke your request for electronic delivery at any time without charge.
If you are a registered shareholder and you have not already done so, you can choose this electronic delivery option by following the instructions provided when voting via the Internet or mobile device and provided on the proxy card. Your choice will remain in effect unless you revoke it by contacting our transfer agent, Continental Stock Transfer & Trust Company at 1 State Street 30th Floor, New York, NY 10004, phone (212) 509-4000. You may update your electronic address by contacting Continental Stock Transfer & Trust Company.
If you hold your shares through a bank, brokerage firm or other nominee and you have not already done so, you can choose this electronic delivery option by contacting your nominee or by following the instructions provided when voting via the Internet or mobile device. Your choice will remain in effect unless you revoke it by contacting your nominee. You may update your electronic address by contacting your nominee.
2023 ANNUAL MEETING OF SHAREHOLDERS
Any shareholder proposals intended to be presented at our 2023 Annual Meeting of Shareholders and considered for inclusion in our proxy materials must be received by November 7, 2022 and must comply with the procedures of Rule 14a-8 under the Exchange Act. Shareholder proposals failing to comply with the procedures of Rule 14a-8 under the Exchange Act will be excluded. If the date of our 2023 Annual Meeting is more than 30 days from the anniversary of the date of the 2022 Annual Meeting, we will publicly announce a different submission deadline from that set forth above, in compliance with SEC rules.
Our Bylaws establish an advance notice procedure with regard to shareholder proposals that a shareholder wishes to present at an annual meeting of shareholders. To be properly brought before the 2023 Annual Meeting, a notice of the matter the shareholder wishes to present at the meeting must be delivered to the Chairman of the Board at the Company’s principal offices in Chester, NY (see below) not less than 90 nor more than 120 days prior to the first anniversary of the date of this year’s Annual Meeting. As a result, any notice given by or on behalf of a shareholder pursuant to these provisions of the Bylaws (and not pursuant to Rule 14a-8) must be received no later than February 4, 2023 and no earlier than January 6, 2023. However, if the 2023 Annual Meeting is more than 30 days before or after the first anniversary of the date of this year’s Annual Meeting, such notice must be received no later than the close of business on the 10th day following the date public disclosure of the meeting date was made. All shareholder proposals must comply with the requirements of the Bylaws. The chairman of the Annual Meeting may refuse to acknowledge or introduce any such matter at the Annual Meeting if notice of the matter is not received within the applicable deadlines or does not comply with the Bylaws. If a shareholder does not meet these deadlines or does not satisfy the requirements of Rule 14a-4 of the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is presented at the Annual Meeting.
Shareholder proposals should be sent to us at Repro Med Systems, Inc., 24 Carpenter Road, Chester, NY 10918, Attention: Corporate Secretary.
We pay the cost of this proxy solicitation. Pursuant to SEC rules, we are making this Proxy Statement and our Annual Report on Form 10-K available to our shareholders electronically via the Internet. In addition to soliciting proxies by Internet, mobile device and mail, we expect that a number of our employees will solicit shareholders personally and by telephone. None of these employees will receive any additional or special compensation for doing this. We will, on request, reimburse banks, brokerage firms and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners of our common stock and obtaining their voting instructions.
The Company will furnish without charge to each person whose proxy is being solicited, upon the request of such person, a copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, including the financial statements and schedules thereto, but excluding exhibits. Requests for copies of such report should be directed to Repro Med Systems, Inc., 24 Carpenter Road, Chester, New York 10918, Attention: Corporate Secretary, or by calling 845-469-2042. The Annual Report on Form 10-K accompanies this Proxy Statement, but does not constitute a part of this Proxy Statement.
- 30 -
By Order of the Board of Directors,
| /s/ R. John Fletcher |
| R. John Fletcher, Chairman |
| March 18, 2022 |
- 31 -
YOUR VOTE IS IMPORTANT. PLEASE VOTE
Vote by Internet, Smartphone or Tablet - QUICK ▼ ▼▼ EASY
I M M E D I A T E – 24 Hours a Day, 7 Days a Week or by Mail
| REPRO MED SYSTEMS, INC. | Your Mobile or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. Votes submitted electronically over the Internet must be received by 11:59 p.m., Eastern Time, on May 5, 2022. | ||
 |
INTERNET www.cstproxy.com Use the Internet to vote your proxy. Have your proxy card available when you access the above website. Follow the prompts to vote your shares. | ||
 |
MOBILE VOTING On your Smartphone/Tablet, open the QR Reader and scan the below image. Once the voting site is displayed, enter your Control Number from the proxy card and vote your shares. | ||
| PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING ELECTRONICALLY. |
 |
MAIL – Mark, sign and date your proxy card and return it in the postage-paid envelope provided. | |
♦ FOLD HERE ● DO NOT SEPARATE ● INSERT IN ENVELOPE PROVIDED ♦
- 1 -
| PROXY |
Please mark your votes like this |
X |
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS INDICATED, OR IF
NO DIRECTION IS
INDICATED, WILL BE VOTED “FOR” ALL NOMINEES IN PROPOSAL 1 AND “FOR” PROPOSALS 2, 3, 4, 5, AND 6 AND IN THE PROXIES’
DISCRETION ON ANY OTHER MATTERS COMING BEFORE THE MEETING. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL PROPOSALS LISTED BELOW.
| 1. | Election of Directors | FOR all | WITHHOLD AUTHORITY | ||||||||
| (1) R. John Fletcher | Nominees | to vote (except as marked to | |||||||||
| (2) James Beck | listed to the | the contrary for all nominees | |||||||||
| (3) Robert A. Cascella | left | listed to the left) | |||||||||
| (4) Donna French | |||||||||||
| (5) Joseph M. Manko, Jr. | |||||||||||
| (6) Shahriar (Shar) Matin | |||||||||||
| (7) Linda Tharby | |||||||||||
| 2. | Approval of the Company’s Non-Employee Director Compensation Plan | FOR | AGAINST | ABSTAIN | |||||||||
| 3. | Approval of an amendment to the Company’s Restated Certificate of Incorporation, as amended, to change the Company’s name to “KORU Medical Systems, Inc.” | FOR | AGAINST | ABSTAIN | |||||||||
| 4. | Approval of the Agreement and Plan of Merger between the Company and a to-be-formed wholly-owned Delaware subsidiary (“KORU Delaware”), pursuant to which the Company will merge with and into KORU Delaware for the sole purpose of changing the Company’s name and state of incorporation from New York to Delaware, including to approve the Certificate of Incorporation and Bylaws of KORU Delaware | FOR | AGAINST | ABSTAIN | |||||||||
| 5. | Approval, on an advisory basis, of the compensation of the Company’s executive officers | FOR | AGAINST | ABSTAIN | |||||||||
| 6. | Ratification of the appointment of independent registered public accountants for the 2022 fiscal year | FOR | AGAINST | ABSTAIN | |||||||||
(Instruction: To withhold authority to vote for any individual
nominee, strike a line through that nominee’s name in the list above)
| CONTROL NUMBER | |
| Signature | Signature, if held jointly | Date | , 2022. | |||
| Note: Please sign exactly as name appears hereon. When shares are held by joint owners, both should sign. When signing as attorney, executor, administrator, trustee, guardian, or corporate officer, please give title as such. | ||||||
- 2 -
Important Notice Regarding the Availability of Proxy
Materials for the
Annual Meeting of Shareholders to be held May 6, 2022
The proxy statement and our 2021 Annual Report on
Form 10-K
are available at https://www.cstproxy.com/korumedical/2022
Under California Law, if you decide to vote on the internet for this meeting, you will be deemed present in person or by proxy at the meeting, be deemed to have voted at the meeting, and to have consented to vote your shares in accordance with California Corporations Code Sections 20, 21, 600 and 601.
You may revoke your vote and vote again by logging on as provided in the notice originally sent to you by mail.
♦ FOLD HERE ● DO NOT SEPARATE ● INSERT IN ENVELOPE PROVIDED ♦
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
REPRO MED SYSTEMS, INC.
The undersigned appoints Linda Tharby and Karen Fisher, and each of them, as proxies, each with the power to appoint her substitute, and authorizes each of them to represent and to vote, as designated on the reverse hereof, all of the shares of common stock of Repro Med Systems, Inc. held of record by the undersigned at the close of business on March 14, 2022 at the Annual Meeting of Shareholders of Repro Med Systems, Inc. to be held on May 6, 2022, or at any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS INDICATED. IF NO CONTRARY INDICATION IS MADE, THE PROXY WILL BE VOTED IN FAVOR OF ELECTING THE SEVEN NOMINEES TO THE BOARD OF DIRECTORS, AND IN FAVOR OF PROPOSALS 2, 3, 4, 5 AND 6, AND IN ACCORDANCE WITH THE JUDGMENT OF PERSONS NAMED AS PROXY HEREIN ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING. THIS IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
(Continued, and to be marked, dated and signed, on the other side)
- 3 -